The Differentiated Supervision On China’s New Rural Small And Middle Scales Financial Institutions

In recent years, the financial crisis broke the myth which the international rating agencies which have been assessed as high credit rating of the world’s leading commercial banks have created. But the China’s banking sector which had been regarded as the international credit rating agencies at lower levels maintained a good Liquidity and profitability with the environment of China’s economic development and the supervision of bank regulatory authorities, with the efforts that our banks continue to reduce their risk and improve internal control efforts. So, we should rethink the international rating agency standards and methods in bank rating are always right or not? Dose the international rating methods which suit for Western market economies the international rating system also suit for the rating in Chinese banking industry? Even it suit for China’s banking sector, is it also suitable for China’s rural financial sector? Is it suitable for China’s new rural small and medium financial institutions?China’s new rural small and medium financial institutions pilot started in early 2007 in Sichuan, Qinghai, Gansu, Inner Mongolia, Jilin, Hubei these 6 provinces (autonomous regions), extended to 31 provinces (autonomous regions and municipalities) until October 2007. The country set up new-type rural financial institutions in 509 medium and small till the end of 2010.From the perspective of the geographical distribution,152 were set up in the western region, and 153 were set up in central, the last 204 were set up in eastern region, the central and western regions accounted for 60% in total. In the end of 2010, over 80% of the opened agencies loans were put into the "three rural" and small enterprises, in the meantime, the formation of 509 new-type rural financial institutions, a total of 395 (including 349 rural banks, finance companies 9, and rural 37 Mutual funds) has opened; there are 114 still under construction.According to the date has mentioned before, it shows that in the new rural small and medium financial institutions, rural banks accounted for the highest, up to 88%. So the research in rural banks supervision has strong representativeness to the new-type rural financial institutions.This article attempts to address these questions mentioned above, by using the combination of theoretical analysis and normative analysis. The establishment of rural banking supervision system, from a theoretical point of view, should belong to the system economics. In this paper, start with the scarcity of system theory; want to elaborate clearly poor supervision of the situation caused by the scarcity of regulation resources; combine the special nature of rural banks and other financial institutions in rural areas; propose differentiated, moderate regulatory issues. This article uses comparative analysis with the supervision of the source:why the need to regulate this area and comparative analysis differences in regulation at home and abroad.This paper contents include five parts, which are mainly related to the rural small and medium financial institutions, including the regulatory theory, regulatory practice differences between domestic and aboard, why should use the different regulations in our rural bank and other small and medium financial institutions, at last, how to establish the rural banks and other basic regulatory system.ChapterⅠ:Introduction. This chapter discusses the research literatures on supervision, the research methods, the basic framework of this article and logical structure, and the innovation and the inadequacies in this article.ChapterⅡ:The theoretical basis of regulatory differences between banks. Started with the basic theory of bank regulation, banking supervision generated in a certain stage in the practice of banks operating. Some scholars believe that the theory of banking supervision is a summary of national banking supervision practice. Because of the fragility of the banking system and banks externality, bank regulation came into being. The second part discusses the theory about new rural small differences in regulatory supervision of financial institutions. If take the monitor as a resource, it is very scarce, scarcity of resources is the theoretical basis of differentiation strategy is the Rural Bank and other banking institutions. The third part of the regulatory differences between practical significance obtained further evidence of the importance of regulatory differences.ChapterⅢ:differential regulation of the practice in domestic and foreign banks. First summarize the history of regulatory differences between domestic and foreign to understand the development of regulatory differences, and then comparative analysis of the regulatory practice at home and abroad to understand the difference between domestic and foreign bank regulatory differences.ChapterⅣ:Why the difference in the supervision of rural bank. This chapter includes monitoring the status and special nature of the rural banks. On the one hand according to the existing theory, China’s rural banking supervision is not applicable; on the other hand, because of the special nature of rural banks, rural banks need the differential regulation. From abroad for the experience of supervision of small and medium banks, rural banks proposed regulation on the introduction of regulatory differences.Chapter Five:The rural bank regulatory system envisaged. Supervision of rural banks and other financial institutions should adhere to a common regulatory framework but the difference between appropriate regulation on the use of a number of innovative regulatory tools, such as the industry self-regulation and the Rural Bank Association of targeted internal control system regulation.ChapterⅥ:Conclusion. The overall supervision of rural banks conducted a general description; the whole logic and analysis methods are summarized in this article, and also pointed out the existence of unresolved issues.The paper’s main contribution:First, the topic of this paper is targeted. Because the rural banks is in the early days, following the principle of prudent supervision, subject to more stringent regulation, but because of the business limitations in rural banks, they want have the differences with the general supervision of commercial banks in policy, This article has a strong practical significance for the rural banks and other general differences in regulation of commercial banks.Second, summed up the difference between domestic and foreign banks monitor developments, and then analyzed the difference between domestic and foreign bank regulatory practices. For the small rural village bank financial institutions, particularly the special nature was summarized from the perspective of their own rural banks need for differential regulation.Third, the concept of regulatory differences between this paper to re-do a new classification, mainly new small and medium financial institutions in rural areas and the general supervision of the difference between commercial banks, thereby improving the efficiency of supervision.