Compelling Roles Of The New Basel Accord In Reforms Of China’s Banking Policy

With the acceleration of economy globalization and finance unification, especially with China’s being accepted into the WTO, China has been liberating its policies on foreign banks’ entry into the Chinese markets. As a result, Chinese banks will have to operate under international standards as their foreign competitors do. However, the progressive pace of reform in China’s banking systems has lagged behind the internationalization trend. Therefore, it is urged that attentions be paid to the timely transition of China’s banking systems from national rules to international standards in order for the country to further develop its economy.Following the review of banking policies in developed countries, this dissertation explores, from the standard point of institutional economics view, ways in which the New Basel Accord will stimulate reforms in China’s banking policies. Specifically, it discusses how the New Basel Accord will speed up reforms in capital and risk management, information disclosure, and corporate governance with Chinese commercial banks. In addition, this dissertation reveals the influences the New Basel Accord will have on the banking regulatory systems.This dissertation states that changes over the past 20 years in China’s banking policy stem from two reasons. First is the disequilibrium with China’s banking systems caused by internal induced changes and forced changes and second the efforts made by China of rearranging its policies to realize the globalization trends. In other words, changes in China’s banking policies are on-going processes in which conflicts between internal rules and external standards continuously rise and resolve. Global-wide competitions demand Chinese commercial banks run businesses under international rules with a core of the New Basel Accord, raise capital adequacy ratios, enforce risk management, and change business strategies. It is believed that only China’s modernized financial systems be established through completing Chinese banks internal control procedures, improving information disclosure processes, strengthening corporate governance, and enhancing core competence. Meanwhile, banking regulators must realize that to achieve the goal of complying with the New Basel Accord and totally controlling banking risks they must reinforce their regulating capacities and abilities by communicating and cooperating with their international peers.As an external restrain, the implementation of the New Basel Accord is an extremely critical point of new change and challenge faced by China’s banking systems. China has to recognize and seize the opportunity to dissolve all constrains preventing Chinese commercial banks from further development by reforming its financial policies and thus creating an appropriate environment.