Financial Stability And The Construction Of The Financial Safety Net

It has been spurring the governments and the international economicorganizations to take the stability of the whole financial system as being importantthat the financial crisis erupted frequently from the 1990s. And then the contains ofthe financial stability and the frame and instruments of keep the financial stabilityhave been investigated more deeply. How to keep the financial stability has beentaken more attention after The People's Bank of China had issued the "ChinaFinancial Stability Report "(2005) for the first time. Meanwhile, it is more importantto introduce the experience in establish the "financial stability net" aboard, to discussthe advantages and disadvantages of the financial stability net and the center banks'role in keep the financial stability and analyze how to decrease the disadvantages ofthe financial stability net much more deeply and then to make this net more useful inour financial stability.There are six parts in the article.Part One. In this part, we mainly talk the background, the purport, the line and theway of the article.Part Two. From this part, we can know that the background of the financial ability,the different definitions and the factors affecting the financial ability, which have beensummarized as the inner factors (the inner frangibility of the financial system) and theouter factors (the impact from the change of the economic basics, the change of themacroscopically policy and the outer gusty impact).Part three. It is beginning from the history of the center banks' keep the financialability taking the England Bank and Fed. It indicates that the center bank could keepthe financial ability because of its role of The Lender of Last Resort (LOLR). Andthen it describes the frame and instruments of keep the financial stability andgeneralized them as three essentials: Prudential Supervision, The Lender of LastResort and Deposit Insurance. At the last section, it describes the definition of thefinancial stability, the types of the financial stability nets and their advantages anddisadvantages.Part four. This part is beginning from the history of the financial supervision. Andthen the author introduces the experience of other countries. At last, it indicates thatthe supervising system of China should be lead by PBC, participated in by everysupervising department and then changed from the institutional supervision tofunctional supervision.Part five. It is beginning from the history and the experience from other countriesof LOLR system. And then it indicates the problem of moral hazard brought by LOLRsystem. It also analyzes the actuality and problems of LOLR system in China. At lastthe author gives some suggestion to perfect the LOLR system in China.Part six. We mainly describe the basic theory of the deposit insurance system andforeign deposit insurance system arrangements;discuss the moral hazard problem andthe reverse choice created by the deposit insurance system;At last the author givessome suggestion to the establishment of an effective deposit insurance system inChina.