Discussion Of Financial Account Liberalization And Banking Stability

Since the 1980, there is a tide of financial freedom and financial globalization, since 1994 when all developed countries have finished opening the " Capital and financial account", the opening of the " Capital and financial account" become the developing countries' duties. Through studying of the opening of the " Capital and financial account" of the developing countries, we find that the opening of the "financial account" is full of crises and risks for these countries. The 1980's Latin-American debt crises, the Mexico financial crises in 1994 and the Financial Crises in Asian in 1997 showed that the opening of the financial account for developing countries a process full of risks. So studying the problems following opening of the financial account in developing countries, undoubtedly is of great significance for our country's opening the financial account in the future and prevention the financial risks.In most of the developing countries, since the undevelopment of the capital market, banks are the main financial intermediaries. So after opening the financial account, the foreign capital mostly entered these countries through banks. Most of the developing countries ' experience show: the relaxation of the limits of the banks' borrowing from abroad is a critical step for the developing countries to open their financial account, the massive capital inflow almost happened after the banks 'being allowed to borrow from overseas. Meanwhile the large scale's capital inflow always was the main reason of the developing countries' economy's boom and later collapsed of the economy.In our country, banks also undertake above 80% of the fund circulation. So banks will be the main course of the inflow and outflow of capital when we open the financial account.But the banks in developing countries always were very fragile because of the over-banking and moral hazards.This article was divided into four chapters. The first chapter analyzes the influence and the impact the banks suffered after the opening of the financial account,through influencing the scale and the structure of the banks' balance sheet owing to the capital inflow, and influencing the banks system indirectly by some instable factors induced by capital inflow.The second chapter analyzes the consequence of the opening of the financial account when the bank system was fragile and full of moral hazards. The first part analyzes the "over-borrowing syndrome". The second part analyzes the over-investment and bubble economy.The third chapter analyzes the relationship of the opening of the financial account and the bank crises and balance-of-payment crises. Because most of the countries that have opened their financial account was still adopted the fixed or the pegged exchange system. So the exchange system became one of the easily attacked parts. When the government unable to maintain the exchange rate, the volatility of the exchange rate will be a great instable factor to the banks, leading to the bank crises. This part was to study the "strategic complementarities" between the creditors and the speculators to disclose the distinctive phenomenon that the bank crises and the balance-of-payment crises occurred together after opening the financial account in developing countries, while this was not seen before 1980's when the international capital flowing was strictly regulated.The fourth chapter introduces some of the developing countries' experiences, and later analyze some of the problems of China, it includes the state of the capital regulation in today's China, the problems of the banking and the measures to take to reduce the impact in order to provide some beneficial reference for our county's opening of the financial account.