Market Discipline Effect Of China's Listed Banks' Subprime Debt

In the New Basel Capital Accord, Basel Committee on Banking Supervision proposed three pillars of new capital framework-minimum capital standards, supervisory review and market constraints. So market constraint is established as important regulatory elements. Compared with the equity capital and deposits and other debt instruments, subordinated debt is widely regarded as the financial instruments with strong market-binding in the international arena.People's Bank of China and China Banking Regulatory Commission formulated the legal documents about subordinated debt, means that the financial regulatory authorities in China is not only adding channels of enrich the capital for commercial banks, but also achieving market-oriented regulation to China's commercial banks through the particular financial instruments.For our lack of literature for the market constraints of subordinated debt, this article collected the cases of sub-bonds in the China's listed banks from the permission up to now, by combing domestic and foreign scholars'study on the market restraint mechanism. Meanwhile, learning from the spread model set to prove the market binding of subordinated debt by United States and European scholars, on the basis of summing up the subprime market situation in China, do preliminary empirical analysis of the effects of the subprime market constraints. So as to compensate for the lack of domestic research and put forward some useful suggestions for China's banks and government regulators. The empirical results show that, for the sample as a whole, it can't verify the existence of the subprime market constraints.