英国顶级高校 伦敦政治经济学院 毕业论文完全英文版Word格式.docx

英国顶级高校 伦敦政治经济学院 毕业论文完全英文版Word格式.docx

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Problemofregulatingfinancialmarket

（inChina）

CandidateNo36332

2010-2011

PublicManagementandGovernance

DepartmentofManagement

Course:

MG415PolicyAnalysis,EvaluationandImplementation

DateofSubmissionrequired:

23rdMay2011

（5,655words,excludingreferences）

AConciseAnalysisandEvaluation

ontheFinancialRegulationinChina

Introduction:

SinceChinainitiateditseconomicreformmorethan30yearsago,China’sfinancialindustryhasgrownupsorapidlythatitattractsincreasinginternationalattentions.Accordingtostatistics（thePeople’bankofChina,2011）,thetotalassetsofChina’sfinancialindustryin2009amountsto153,800billionU.S.dollars,whichismorethan300foldsofthatintheyear1978whenChinanewlyunveileditseconomicreformandopeneduptotheoutsideworld.AstrikingfeaturewithChina’sfinancialindustryisthat,fordecades,ithadsurvivedsomanyturbulencesandchallenges,includingtheeconomicchaosinlate1980sresultingfromfoodpricereform,spilloverofthefinancialcrisisintheSoutheastAsia,directandintensecompetitionsfromforeignbanksafterChina’saccessiontotheWTOin2002,aswellasthecurrentfinancialcrisiscommencingfrom2008.Nowonderthatpeople,especiallytheyoungChinesepatrioticclaimthatChina’sfinancialindustry,particularlyChina’sfinancialregulatorshavebeenperformingwellenough.ThisleadstotheillusionthatthecurrentfinancialregulationinChinaisnearperfection,andeventhatregulatorsfrommodernwesterncountriesshouldreflectandconsiderlearningsomethingfromtheirChinesepeers.Tryingtoanswerthisquestion,Iwillelaborateonitinthisessay,whichconsistsof4sections.

InSection1,Iwillfocusonthetheoriesoffinancialregulationandtrytoexaminethefollowingpoints:

whyshouldweregulatefinancialindustry?

Whatisthegeneralapproachforfinancialregulation?

Whatcanbedeemedastheappropriatequalitativeandquantitativemeasurementsforfinancialregulationandsupervision?

InSection2,IwillexploreintothecurrentstructureandarrangementforfinancialregulationinChinaandtracebacktoitshistorybackground.Also,acomparisonismadeonthefinancialregulationpracticesbetweenChinaandU.K.,toinvestigatewhetherornotapparentsimilaritiesanddifferencesareexistingbetweenthetwocountrieswithregardtotheregulatoryandsupervisorystructure,sourcesoffunding,regulatoryobjectivesandsoon.TheSection3willfocusonanalysisandcommentontheChina’sfinancialregulation.Mainly,itwillreviewwhetherthecurrentregulationshavebroughtabouteffectiveoutcomes,advantageanddisadvantageofthecurrentregulatoryarrangement,andvariousrecommendationsforpolicyandsystemreformandtheirvalidity.Also,itwilldiscusspathdependencyinChinesefinancialregulationthroughconsiderationofthenatureofChina’seconomicreformfordecades.ThiswillfinallyleadtoSection4,whichistheconclusionofthisessay.Becausethebankingindustrypossessesmorethan93%ofChina’sfinancialresources,MyessaywillmainlyfocusonfinancialregulationinBanking.

Section1Rationale,generalapproachandmeasurementoffinancialregulation.

Financialindustryseemstobeoneofthemostfragileindustriesintheworld.SincetheIndustrialRevolutioninwesterncountriesinthe18thcentury,theworldhasexperiencedfinancialcrisisdozensoftimes,fromtheGreatDepressioninthelate1920s,Asia’sfinancialcrisisin1997,anddowntothecurrentcreditcrunch.Thiswillcertainlyraisequestionsontheimportanceandeffectivenessoffinancialregulation.Fromtimetotime,thepublic,politicians,andtheacademicshaveaskedthesamequestions.Doesthecurrentfinancialregulationprovidesufficientoversightandatthesametimemitigatefinancialrisks?

Wouldthesituationhavebeennotsobadifwehadbeengivenbetteralternativeregulationarrangements?

Thesetrickyandhauntingquestionshaveprofoundanddeepmeaning.Onewillnotunderstandclearlyuntilhe（she）isconvincedbythetheoriesoffinancialregulation.

Fromthe18thcenturytotheearlier1930s,acrossthemajorwesterncivilizedcountries,themajordutiesoffinancialregulators,mainlythecentralbanks,weretoactaslendersoflastresortandimplementthedepositinsurancesystem.ThesetwomainpolicyarrangementswereheavilycriticizedbyHayek（1976）andDowd（1996）,whoarguethatmarketcancorrectitsownerrorandimperfectionthroughexpansionandself-adaptationatlast.Thetotalpowerofcentralbanksshouldbediminishedsoastotackleinflation.Atthesametime,allpeopleshouldbefreetousecurrencyoftheirownchoicessoastoavoidthenegativeimpactofinflation.Moreover,theyclaimthatthereshouldbenowrongwithfreetradeandlaissez-faireinfinancialservicessectoriffreetradeisgenerallydesirable.Theirclaimhasbeenechoedbyotheracademicliberals（Benston,1996;

Kane,1997）whofurtherarguethateventhereismarketfailure,financialregulationmaystillbeundesirable,unnecessaryandcan’tinpracticesolvethefailures,andmayleadtoabundantlyexcessiveregulationcostsandinduceseriousmoralhazards.Theseliberalideologiesineconomicsmaynotturnouttobecompletelyconvincingifoneconsidersthedevastatingresultsoffinancialcrisisthroughouthumanhistory.Stiglitz（1993）examinestheimportanceofinformationinfinancialmarketandidentifiessevenmarketfailuresandclaimsthatinformationisapublicgoodandthatregulationcanleadtoParetooutcomebyprovidingenoughinformationthatotherwisewouldnotbeprovidedunderfreefinancialmarket.

Llewellyn（1999）outlines6potentialbenefitsoffinancialregulation:

①toreducetransactioncostsforconsumers;

②tomitigateoramelioratemarketfailuresoastoachieveefficiencygains;

③toimproveandmaintainconsumerconfidence;

④togeneratepositiveexternalities;

⑤toexpelhazardousfirmsfromthemarketthroughefficientauthorizationprocedures;

⑥tomakesurethatconsumerscanhaveinformedandreasonablejudgmentsanddecisionsbyincreasingtransparencyofcontractsanddisclosingduecomprehensivemarketinformation.Inadditiontothecomprehensiverationaleforfinancialregulation,hefurtherpointsoutthatefficientlyframedregulationhasitslimitationandinrealityisunabletocoveralltherisks,therefore,efficientregulationshouldneverdiminishtheincentiveforconsumerstoexerciseduecarewhiletheyarepurchasingfinancialproductsandservices.

Goodhart（1998）demonstratesthatregulationshouldbeneededsoastorefrainmonopolyoroligopolyfromexploitingconsumers,toprotectsmaller,retailclientswhoarelessinformed,tomaintainfinancialsystemicstability.Theyfurtherexamineandprovethatsystemicriskinvolvedinbankingindustryisconsiderablymoreevidentthaninnon-bankingfinancialservicesinthatthefailureofonebankcanbeofcontagionandleadtothewithdrawofdepositsfromotherbanksandthereisnowell-establishedsecondarymarketinbankloans.

Davies（2008）,however,putsitverysimplethatweneedregulationoffinancialfirmsbecauseweneedtoprotecttheLenderofLastResortanddepositprotectionschemes.Moreover,thereisinformationasymmetrybetweenfinancialservicesprovidersandconsumers,andfinancialregulationandsupervisionmaybeabletocorrectsuchasymmetry.

Goodhart（1998）identifiesthegeneralapproachoffinancialregulationthroughincentivestructures:

①Regulationshouldberegardedasasetofcontracts;

②Moreemphasisshouldbelaidoninternalriskanalysis,managementandcontrolsystemsandsoon.

Sincethelate20thcentury,scholarshaveproposedacoupleofmeasurementstofacilitateregulationfromMacro-prudentialtoMicro-prudentialdimensions.Sundararajan（2002）createdfinancialsoundnessindicatorswhichincludecoresetandencouragedset.Thecoresetindicatorsmainlycovercapitaladequacy,assetquality,earningandprofitability,liquidityandsensitivitytomarketriskandotherfactorsofdeposit-takinginstitutions.Thesedetailedindicatorsincluderegulatorycapitaltorisk-weightedassets,nonperformingloanstototalgrossloans,returnonassets,liquidassetstototalassets,durationofassetsandsoon.Financialregulatorsarestronglyrecommendedtoapplythesecoresetindicators.Additionally,theencouragedsetindicatorscoverwiderrangeoffactorsinnonbankfinancialinstitutions,corporatesector,householdsandrealestatemarkets.

Hilbers（2000）proposedmacro-prudentialindicatorswhichintegratesaggregatedmicro-prudentialindicatorswithmacroeconomicindicators.Theaggregatedmicro-prudentialindicators,whicharebasedontheCAMELSframework（capital,assets,management,earnings,liquidityandsensitivitytomarketrisk）,includeaggregatecapitalratios,sectoralcreditconcentration,expenseratios,returnonassets,centralbankcredittofinancialinstitutions,foreignexchangerisk,marketpricesoffinancialinstrumentsandotherratios.Themacroeconomicindicators,ontheotherhand,focusoneconomicgrowth,balanceofpayments,inflation,interestandexchangerates,lendingandassetpricebooms,contagioneffectsandotherfactors.Thesefactorscanbemeasuredbyaggregategrowthrates,currentaccountdeficit,volatilityininflation,volatilityininterestandexchangerates,lendingbooms,financialmarketcorrelation,directedlendingandinvestmentandotherratiosorfigures.

Itisallknownthatacademicsaroundtheworldstillproducenosignificantandreliablequantitativemeasurementtogaugeconsumer’sprotectioninfinancials