Research On The Design Of Commercial Bank Insolvency Standard

Certain amounts of banks will inevitably go bankrupt in the market economy.Because the special social role and financial service function of banking institutions and contagion effect of the bank bankruptcy,various countries have the banks adopt special acts or apply special rules as to the insolvency.And the design of banking bankrupt system must go around insolvency standard as the key point.Although it has always been a complex issue,the standard of insolvency of commercial banks is of great significance.The value of the bankrupt bank is a minus function of time.Scientifically setting insolvency criteria can reduce loss of bank value and protect the rights and interests of creditors.It can also prevent supervisory power from idleness or abuse to protect interests of banks,reduce wastage of finance and safeguard the security of the whole bank system.Scientific and reasonable criteria of banking insolvency should abide by the definite,efficient and appropriately flexible principle.The bankrupt measures should also be ensured appropriate and reasonable to maintain the authority of supervisory power. At the same time,in order to avoid the crisis of banks to be hoarded,break out and spread,banks should be urged to seriously obey the rule. Ultimately it will be beneficial for the bankruptcy mechanism to strengthen the discipline of financial market,reinforce the internal management of banks,lower probability of bankruptcy risk,and thereby reducing potential systemic risk.This paper,based on legal theories and the economic analysis tools,is aimed to seek for the theoretical roots,value-oriented and practical significance of insolvent standard systems of commercial banks.First it reveals the particularities of bankruptcy and insolvent standards,and analyses the theoretical foundation and actual impacts of insolvent standard systems from legal and economic perspectives.Simultaneously it briefly evaluates and compares diverse system models abroad,especially in countries such as Britain,the United States and South Korea,then analyses their resemblance and reason for the differences.So the paper concludes that institutional traditions,social foundation and system culture are the main factors which decide the bankrupt policy including its reason.Finally, it analyses the deficiencies and inadequacies of currently relative systems of bank insolvency standards in China,and puts forward the related design to improve China's insolvent standards of commercial banks according to present valid laws and the actual situation.Consequently,it proposes that regulatory insolvency standard system should be disintegrated then constructed in objective and subjective criteria dimensions.Therein, objectively insolvent standards should be defined from quantitative and qualitative perspectives,while the subjective criteria be regulated from the perspective of the request for regulatory bodies' exercise of discretionary power,which not only gives the regulatory bodies discretionary power in order to guarantee the efficiency of bankruptcy,but also designs related exercise procedure to prevent abuse of power.When designing the bank insolvent standard of China,this paper also considers some soft indexes such as bank inner management,market confidence,recovery tendency,etc.and endow these indexes with relevant weight and reference coefficient.Besides,the anticipated exertion of insolvency standard system needs necessary supports institutionally and conditionally,including the completion of audit and inner management system,information transparency and effectiveness of transmission mechanism on financial market,extensive punishment power entitled to supervisory authorities,deposit insurance system and the like.