The Methods Of Optimizing Banking Supervision Research Based On Cost-Benefit Analysis Perspective

As·an important component of financial supervision, the banking supervision is always the bulwark of maintaining the safety of financial system. An effective banking supervision system can create a sound environment for the prudent running of the banks and thus promote economic development. The frequent breaks out of bank failures and financial crisis since the 1990s have drawn the significance of effective banking supervision. However, through the practice of supervision all over the world, we find that it does not mean the more supervision the better because as an economic act banking supervision will bring both cost and benefit which the regulatory authorities should balance well.The United States introduced the cost-benefit analysis into the financial supervision analysis system as early as the 1980s as the regulatory model for increasing regulatory effectiveness in the federal government which has become the main approach of evaluating the regulatory performance. In the UK, the regulatory authorities have legislated the cost-benefit analysis as the fundamental principles of financial supervision evaluation. In China, the regulatory authorities have been exploring market-oriented regulatory methods in recent years, focusing on effective allocation of regulatory resources and reduction of regulatory cost. However, the regulatory authorities are shackled by a huge supervision cost without effective supervision at the same time for the lack of regulatory philosophy, monitoring techniques and short time development of Chinese banking supervision. Therefore, how to enhance our banking supervision level while decreasing the cost and increasing the benefit of supervision is high on our banking regulatory authorities'agenda.Beginning with the introduction of the framework of our banking supervision, this thesis first made a qualitative analysis and empirical study of the cost and the benefit of our banking supervision by using a game model of banking supervision based on large amount of relevant material and data, demonstrating the attribute of Chinese banking supervision, i.e. high-cost but low-benefit. Based on the above analysis, the author delved into the causes of this attribute in terms of regulatory philosophy, regulatory methods, market forces and market exit, then put forth four measures to optimize Chinese banking supervision: Change the regulatory philosophy. Turn the current regulation-oriented regulatory philosophy into a principle-oriented one so as to enhance the effectiveness and sustainability of our banking supervision; Improve the regulatory methods, mainly to promote the effectiveness of on-site examination and the upgrading of off-site regulation; Strengthen the market forces. On the one hand, improve the information disclosure system to encourage financial institutions in the banking industry to establish self-regulation awareness; on the other hand, set up the external accountability system for regulation to encourage regulatory authorities to improve the transparency and prudence of regulation;By introducing of pre-commitment system, set up a new market withdraw mechanism that can not only effectively avoid moral hazard but also significantly reduce regulatory costs.The perfecting and optimizing of the above four aspects can bring effective reduction in our banking regulatory cost and increase in regulatory benefit, thus contributing to the improvement of our banking supervision.