A Probe Into The Market Withdrawal Issue Of The High-risk Small And Medium Financial Institutions In China

The analysis of the typical cases shows that, there are not systematic standards for the market withdrawal of the high-risk small and medium financial institutions in China. The selection of withdrawal pattern has displayed the randomness, which increase the decision cost, coordination cost and liquidation cost; in the meantime, the share of cost has been streamlined. The analysis further displays that, the cost of the market-oriented merger is much lower and optimized when compared with the administration-guided one. In China, the administrative closedown pattern features comparatively low overall cost in comparison with bankruptcy; the high-risk small and medium financial institutions will bear lower cost through early withdrawal then through late withdrawal.In the actual practice, China has gradually established the means that the local governments finally bear the main cost for the market withdrawal of small and medium financial institutions, and resort to the obtain of reloans from the central bank through the local fiscal departments as the main funding resources for the market withdrawal. In fact, it is the formation of invisible, completely protected, non-institutional arrangement and can easily lead to the deposits insurance methods involving moral risks. However, because of the weak financial strength, the local governments often defer the repayment of the special reloans to the central bank and further cause the obvious "monetization" trend of the withdrawal cost of the financial institutions. The author supports the opinion that the withdrawal cost of the financial institutions should be shared by multiple parties, the deposits repayment insurance system with certain extension should be established, and savings should be fully repaid before the limited repayment system is implemented, In addition, in this essay, the author puts forward the conceive that before the financial industry realizes perform marketization, the local fiscal departments should allocate some funding from the budget funds to make up the deposits insurance funds, according to the amount of the deposits or the scale of assets of the local financial institutions. Such conceive not only requests the local governments to bear some part of the market withdrawal cost of the financial institutions, but also takes into consideration of the actual financial conditions of the local governments. The local governments may use the deposits insurance organizations as the carriers to participate in the general supervision and risks disposition of the local financial institutions, and match the obligations and rights in the prevention and dissolve the local financial risks.