Research On The Relationship Between Competition And Stability In The Regional Banking Market

Banking industry is the most important department of a country. The stability ofthe bank has a great significance for financial stability and the stability of the wholeeconomy. The development of Chinese banking industry has its particularity. For along time, there exist some questions, such as insufficient competition, low efficiencyand so on. Along with the reform, the competition between banks is changing too.Would bank competition affect bank stability? There exist two kinds of views: One is"competition-stability theory", one kind is "competition-weak theory". Therelationship between the competition and stability is positive correlation or negativecorrelation, the academic circles still didn’t reach unanimous conclusion. Analysis thebank market competition and stable, and to explore the relationship between them, ithas certain significance for supervision departments to take measures, maintain thestability of the banking system from the macro level.This paper studies mainly focus on the banks in the county area. Analysiswhat kind of relationship exist between the bank competition and bank stability. Firstof all, analysis the competition of the bank, discusses the method of measuring bankcompetition, and analyzes the influence factors of the bank competition-bank number,and the relationship between them. Next, analyze the stabili ty of regional banks,discuss the definition of bank stability and the influential factors of the bank stability.Based on the analysis before, discuss the relationship between competition andstability, expound the views of "competition-stability theory" and "competition-weaktheory". Next, use the county of Hunan province as an example, use the empiricalmeasurement method, respectively measure out the regional Banks competitiondegree-H value, as well as measure regional Banks stability-Z index. Again, usingthe econometric model, analysis the relationship between Chinese regional bankcompetition and the bank stability, it is concluded that the competition is helpful toenhance the bank stability. Finally, based on the analysis before, put forward thepolicy Suggestions of improving the bank’s competition situation under theprecondition of bank stability.The final conclusion is that, in the county area, there is positive correlationrelationship between the bank competition and bank stability. Due to the countyregion economic and financial development level is relatively backward, banking institutions quantity is less, makes the county area banking lack of effectivecompetition mechanism. The direction of the reform in our country should beemphasize the importance of introducing competition mechanism, relax marketcontrol, encourage the development of small and medium-sized Banks, improve thebank’s operational efficiency, under the premise of enhancing the regional bankstability, build a dynamic, efficient banking market.