The Institutional Research On China's Banking System Fragility

The banking has been developing rapidly from the 1980s,however the banking crisis have broken out frequently during the last twenty years .The financial fragility accumulates progressively so that it can not be undertaken by the financial system and the destroying energy breaks out suddenly. That banking crisis break out frequently leads people pay more attention to the research of financial fragility. Some economists believe that the high debts ratio operation decides the congenital bank failure. This is the narrow sense concept. Correspondingly, the broad sense concept of financial fragility is the situation of high risks.The accumulation course of Chinese banking system fragility in China is different from that of banking fragility in western countries. China is a new marketable country. It is transiting from planned economy to market economy .In the transition courses, the economy has the characteristics of weak public finance and strong finance. Four state banks monopolize the banking market and assume the responsibility of supplying funds to state-owned enterprise. So the banking system fragility is a very important problem that expresses as bank structure fragility, credit market fragility and supervision fragility .On the point of institution transition, this paper reveals that the source of Chinese banking system fragility is its special financial institution.The Chinese economy society is character by its double-level structure in history. The double-level structure is a history concept .The double-level structure consists of upper level and lower level .The upper level refers to premiere, the lower level refers to civilization and the middle level refers to princes under the emperor. Because of the lack of middle level, the lower level cannot unite middle level to form strong negotiation power to balance and strict the right of upper level .As a result, the private property right of the civilization cannot be protected. The upper level controls the lower level strictly all along. Under this economy history background, it is natural to form a financial institution controlled by state. Banking serves as an important factor in State's utility function, which seeks maximum utility. As the state control cost increases, the state would relax the control by reforming the state bank's present institution. However, the bank deposits have served as debt capital substituting state's financial capital. That means multitudinous households have become the real owners of the state's bank. If the state wants to pass the propriety rights of state banks to other economic units, it must firstly pour enough funds into the state bank's capital and make the bank deposits return to be bank's debts only. The problem is that the states have no enough funds. The statebank's reform falls into a difficult position because of the bank's capital problem.This paper is composed with five parts. The first part is the preface .The second part is the survey of banking system fragility studies. It firstly introduces the narrow sense and the broad sense concept of financial fragility .The narrow sense concept is that bank's high debt ratio decides the congenital banking system fragility. The broad sense concept refers to a high financial risks condition. This paper uses the broad sense concept and compares the concept of banking fragility with the concept of banking risks and the concept of banking crisis. Then it introduces how to judge and measure the banking fragility and discuss the difference between the forming principle of banking fragility in western developed countries and that in China .The prime viewpoint is that the forming and accumulation of Chinese banking system fragility are mainly decided by institution factors. The third part particularly analyzes the fragility in organization system, credit market and supervision system according to the economy appearance.In2001, China entered into the WTO. Chinese banking market will be opened completely in five years. The competition of foreign banks has two affect...