A Study Of Differential Supervision Upon China’s Commercial Banks

The definition of differential supervision upon commercial banks is that,when the banks supervision departments carry out their responsibilities aboutthe commercial banks, they will set differential indexes requirements and havedifferential measures to different kinds of commercial banks according to theirspecial traits, in order to keep the banking system performing safely andefficiently. On one hand, different kinds of commercial banks have their ownspecial traits, for example, they differ in the inner structure, the managementsystem, the risk-control ability, the services and products, the ability toacquire and process useful information and so on. On the other hand, the policiesfrom the government that they receive, and the outer environment and competitionthey are faced with are also with distinctions for different kinds of commercialbanks. Hence, to perform differential supervision upon commercial banks makessure that the banks can make full use of their comparative advantages and geta fair supervision environment. Therefore, the commercial banks can operatesafely and efficiently, which is the basis of the stability of banking systemand the development of economy.Recently, differential supervision upon commercial banks has become a globaltrend within the banks supervision area. Basel III in2010specially broughtup the idea of the division of banks into G-SIFIs (Global-Systemically ImportantFinancial Institutions) and non G-SIFIs (non Global-Systemically ImportantFinancial Institutions). As a reaction, China Banking Regulatory Commission hastaken this idea into consideration. At the same time, on the global level, thebanks supervision departments have put safety before efficiency as the firstimportant factor when it comes to supervision concept. In China, differential supervision upon commercial banks is necessary. Weusually divide Chinese commercial banks into four categories, that is,state-owned commercial banks, national joint-stock commercial banks, municipalcommercial banks, and rural commercial banks. They all have different traitsin their own developing and operation models. And there are some shortcomingson China’s operation of differential supervision upon commercial banks.Meanwhile, we also have strong theoretical basis on differential supervision.We can use cost-benefit analysis, return-to-scale theory, and risk preferencetheory to illustrate it. Therefore, to perform differential supervision uponcommercial banks is of high requirements.This paper divides Chinese commercial banks into three groups on thefoundation of their asset size, including large-sized banks, medium-sized banksand small-sized banks. In this paper, we observe the mean value statistical graphof banks’ indexes and carry out an empirical study using unbalanced panel datamodel. Then we find that, medium and small-sized banks are better performed thanlarge-sized banks in the respects of capital adequacy, operation efficiency,liquidity and profitability, but with relatively higher non-performing loanrates; medium and small-sized banks outperform large-sized banks when they lowerthe banks’ non-performing loan rate by increasing capital adequacy ratio;large-sized banks outperform medium and small-sized banks when they lowernon-performing loan rate by increasing return on asset and return on equity;the current minimum capital adequacy ratio requirement of8%works with morerigorous vigilance to large-sized and small-sized banks than medium-sizedbanks.