Multinational Banks In China Of Systemic Risk Prevention And Response Measures

This paper analyzed the systemic risk regulatory issue of transnational banks,systemic risk referred to the impact to securities’ price that are resulted from overallpolitical, economic, social and environmental factors. Generally, systematic riskincluded policy risk, cyclical economic volatility risk, interest rate risk, purchasingpower risk and currency risk etc., which can not be eliminated through diversifiedinvestment and therefore known as un-diversifiable risk. Since1970s, transnationalbanks have further developed; profit division was getting into smaller and smallerwith competitiveness increasing and there were growing necessities to adjust thecapital surplus and deficiency among banks. In this case, risk correlations degreebetween banks was becoming more closely and the problem occurred to a singletransnational bank will affect the operation security of other banks as well, whichdeveloped the systemic risk.This paper analyzed the systemic risk prevention and response measures oftransnational banks in China from four perspectives: First, necessities and urgenciesof systemic risk precaution were analyzed and the case study method was employedto illustrate that outbreak of systemic risk was infectious. With China’s acceleratingaccession into WTO process, globalization process will be further intensified, whichbrought more opportunities and various risk as well, if we do not make earlyprevention the biggest loser in the next financial crisis will be our own.The second aspect of the development of China’s multinational banks and theirregulatory status quo, and November2006, China has fulfilled its commitment to theaccession to the WTO, the opening up more foreign financial institutions to accessrestrictions, indicators less, foreign banks to become main can not be ignored in thefinancial system, foreign banks, the speed of development is directly related to theprocess of financial development in China and China’s financial security and stability.Supervision of foreign banks has become a very important issue in the text briefanalysis of cross-border bank funding distribution and domestic regulatory authorities of its regulatory history look to the future in order to better carry out the supervisionof multinational banks.The third aspect is the main part of the article, and analysis to strengthen thesystematic analysis of the multinational banks from which to start the access link,operational aspects and market exit link. In the access link from the access conditions,access forms, geographical restrictions and openness issues, access conditions andinternational standards, the proposed regulatory approach should be restricted into theprudential regulation; in the operational aspects of regulatory philosophy, supervision,and the competitive environment and other aspects to be addressed; exit link in themarket to avoid the exit of blindness, exit criteria, and exit to save the analysisproblem.Finally, according to the previously mentioned one-to-one correspondencerelated to the regulatory system, emphasis on asset quality and internal controlmechanisms of regulatory capital adequacy ratio of core to establish a depositinsurance system and the systemic risk prevention measures to adapt tomarket-oriented development handle the vulnerability of China’s banking industry,the establishment of a fair competitive environment to ensure the security andstability of the domestic financial industry to better promote the development ofChinese-funded banking.