China Merchants Bank Security Network Construction Basic Research

Author: Li Zongyi
Publisher:
Publish Date: 2006-06-01
Features: This book analyzes the fundamental policy instruments of a banking safety net applicable in developed countries and whether and how they can be introduced into China, addressing the basic issues of constructing a banking safety net in China. Additionally, it explores how to improve China's banking safety net from a systemic risk perspective, aiming to broaden and deepen research on banking safety issues in China's theoretical circles. The book consists of three parts. Part I is Chapter 1, which analyzes the theoretical basis for establishing a banking safety net in China. It first examines the policy mechanisms for ensuring banking stability, then discusses the theoretical disagreements over the main policy instruments of a banking safety net. The second part includes Chapters 2, 3, and 4, which analyze whether and how the basic policy instruments of a banking safety net applicable in developed countries can be introduced into China and address the fundamental issues of constructing a banking safety net in China. The focus is on capital adequacy regulation and deposit insurance. However, since these two instruments are closely linked to each other and to bank closure policies, this part does not discuss each policy instrument in isolation but instead analyzes the relationships among the three instruments and their impact on constructing the entire banking safety net while emphasizing capital adequacy regulation and deposit insurance. Chapter 2 conducts a theoretical analysis of the necessity of introducing capital adequacy regulation in China, critically examines the trends in capital adequacy regulation, analyzes the conflicts and compromises among interest groups during the negotiation of the Basel Agreement from a political economy perspective, discusses the impact of the Basel Agreement II consultation draft on developing countries, and uses theoretical models to illustrate how internationally unified capital adequacy regulation systems can lead to spillover effects on bank closure policies. Chapter 3 employs a cost-benefit analysis to examine the practical necessity and feasibility of introducing capital adequacy regulation in China. Chapter 4 conducts a cost-benefit analysis of introducing an explicit deposit insurance system in China and discusses the necessity and feasibility of introducing a group deposit insurance system in China in the next 5–10 years. The third part is Chapter 5, which explores how to improve China's banking safety net from a systemic risk perspective. First, it measures the implicit risk exposure of China's banking system and establishes an indicator system to monitor the implicit risk exposure of China's banking system. By analyzing interbank lending market transaction data and the balance sheet data of commercial banks, and combining the use of a matrix model to estimate the distribution of interbank risk exposure in China, it estimates the "contagion" risk within the banking system. Second, it discusses the optimal closure policy for problem banks.