Game Analysis Of Foreign Government Rescuing Bank And The Enlightenment To China

The2008financial crisis indueced to the bank Lehman brothers were deep in a liquidity crisis, soon after Lehman brothers collapsed.At that time, the American government did not rescue Lehman brothers, which made many economists to think that the financial crisis blame the United States government to the Lehman brothers bank indifferent manner, that is the United States government decision down market confidence.Diamond and Dybvig model has said, if the government is no longer providing deposit insurance or stopping bank financing, the consequences will be very serious, because the bank can not only make the bank credit risk, but also involved the production activities, finally will affect the whole economy.Therefore, the government’s short-term loan and deposit insurance are required.The fragility of the financial system, often has far-reaching effect.In the financial system between every bank closely connected and interdependent credit chain, making a small number of bank bankruptcy would like a rolling snowball rolling bigger and bigger, serious impact on other commercial bank liquidity.The public panic will cause banks by Domino effect, leading to the collapse of the financial system.Generally speaking, in this situation, the government generally will inject into liquidity, avoid a liquidity crisis in the financial system failure.But the government rescues of banks will also produce the so-called moral risk problem, because of asymmetric information and adverse selection, and make the insolvent banks access to funds, or bank once informed of deposit insurance, knew that they had problems, always received financial assistance and is likely to changing their behaviors and triggering banking moral hazard problem.Apparently Diamond and Dybvig model did not take this into consideration.Holmes Teemu and Tirole on Diamond and Dybvig’s theory was developed, they command that if the owner of the bank confront risk of investment project, oneself also assume some risk, can overcome or reduce the moral hazard problem.Banking is the depositors’ money into these projects, but unless the owner of the bank’s shareholders have their own, otherwise the bank does not have motivation to wise use of project funds.Secondly, Holm Sturm and Tirole believes that the government’s role is not only to provide the insurance.Holmes and Tirole model illustrates how the government should intervene, to provide additional funds to prevent the emergence of liquidity risk.Bank crisis, making the government a challenge is not to rescue banks weighed the systemic risk and to help behavior facing moral risk.Liberal economists tend to believe that government intervention in the economy is inefficient and ineffective.They also opposed the government’s bank interventions, think the market will eliminate poor management of the bank, which is consistent with the rules of market economy.But the banks’vulnerability and system decision translation bank management of high risk, some superior may cause bank crisis infectious and bankruptcy, so in practice, the government should be able to effectively distinguish bank near collapse because of lack of liquidity or insolvent.For the latter bank rescue measures, not only can not make it through, will lead to more serious moral risk.Therefore, the government should according to different banks make different financial assistance policy, which is also consistent with the law of the development of financial market.In financial practice, we can use the vertical and horizontal two considerations on the bank crisis relief problems, one is, the banking crisis is a small size limitations or large scale system.Two, the bank near collapse is due to the liquidity crisis or because of the emergence of serious insolvent.Once the banking crisis, the government will need make a short period of time to salvage or assistance decision, the government is concerned, is not an easy thing.The key reason is that the commercial bank even for serious insolvent and was on the verge of collapse and motives masquerading as merely a liquidity problem bank.This allows the government in the decision-making process in the asymmetric information between the commercial banks, and lead to the government and commercial banks have mutual game behavior.This article main discussion of the government’s bank bailout of the necessity and the government how to save banks and made analysis and specification.The characteristic of this paper is:1from the vertical and horizontal two aspects to consider the government on the bank crisis aid.2from the2008financial crisis and thereafter the moral risk to consider the necessity of government bailout of banks.3from the government bailout of banks and how to prevent potential moral moral risks in two aspects.4government bailout of banks and how the moral risk management two aspects carries on the game analysis.This paper is structured as follows:The first part is the introduction of background of this topic.The background of this topic at home and abroad and the bailout of the banking theory.The second part, the theoretical basis of government bailouts of banks. Analysis of bank fragility and the basic game theory.The third part, the behavior of governments to rescue banks.To study the bank rescue necessity and the moral risk.The fourth part, game analysis.Using the game theory analysis of government and bank between the game behavior, and the result is discussed.The fifth part, the main conclusion and follow-up study.Internal protection and external supervision in two aspects to prevent moral risk.The sixth part, the Bank of China the problems, as well as foreign government bank rescue the enlightenment to china.