The Effect Of Foreign Bank Entry On Emerging Market Economies' Bank Industry And Its Inspiration On China

In the most of time of 20th century, the openness of the banking market in the most of the emerging countries and regions was very low. Since the 1990s, the process of the emerging countries had accelerated obviously. What effect of foreign bank entry did have on the emerging market economies'banking industry? Our learning the emerging market economies'the experience of introduction of foreign bank, it was significant that we investigated countermeasure we should take in face of the full openness of Chinese bank sector.In the first chapter, I expatiated the meaning of the selecting the topic. Then I reviewed the representative literature.In the second chapter, I analyzed the effect of foreign bank entry on the host counties in theory. First, foreign bank had impact on the effectiveness. Through increasing the competition of banking sector and bringing technology demonstration effect and the spillover effect, the foreign bank had the positive effect on the host countries'bank effectiveness. In the meanwhile, it had the negative effect: the entry of foreign bank engendered the cherry-picking effect that decreased the effectiveness. The foreign bank made the bank's franchise value of banking license of host country fall. They also had more advantage in technology, management and talents than the banks of host country. Second, it was the effect on the stability of bank industry. The foreign banks increased the stability, at the same time increased the instability. During the period of financial crisis, the contraction of the loan and the capital exacerbated the depth of the financial crisis. The increasing competition and new financial products aggravated the risk and instability.In the third chapter, I described the development of foreign bank in the emerging markets economies. Since the early 1990s, the emerging market economies gradually canceled the restriction of foreign bank entry. Since the mid-1990s foreign investment in the banking sector through FDI to the Latin America, Asia and Central-Eastern Europe was increasing rapidly. In the 1980s, the overwhelming majority of Latin American countries fell into the economic difficulties of inflation and debt crisis. They must carry out economic reforms. The privation of bank was one part of the reform. The privation of bank implemented through introducing the foreign bank and foreign strategic investors. In the era of the planned economy, the state-owned banks of mid-Eastern European countries accumulated a huge mount of loans and was going to bankrupt in order to meet the needs of economy as a tool of allocating the funds. In 1989, at the advent of the great tide of the market economy, the imminent reforms of every country's bank was urgent. The entry of foreign to Mid-Eastern countries was to meet the needs of privation of banks. Comparing the Latin American countries and mid-Eastern European countries, the level of foreign bank participation in emerging market countries in Asia was low. But the prospect was considered to be optimism. The characters of foreign bank in emerging market countries were that entry in M&A way, the decision-making powers transferred to the parent bank and diversified investment institution.The fourth chapter analyzed influence of foreign bank entry to the emerging market country on the local banking industry. The function of foreign bank entering the Latin American countries and the Mid-Eastern European countries was quite typical. Therefore we illustrated it in this part. The Foreign bank leaded different influence on banking industry of different emerging market country. In Brazil, the foreign bank had played quite positive role, but had played the opposite role in Argentina. The reason was that the Brazil's government supervision played an important role, moreover Brazil's bank paid great attention on the demonstration effect of Foreign bank and promoted competitive power of its bank; But in Argentina the financial liberalization process was too radical, and the control of Foreign bank was inadequate. In Polish, after introducing foreign bank, the domestic banking industry also had big development. From the experience of Polish we can get the conclusion: Obtaining the control of entry mode and the approach velocity, dealing with the foreign bank competition positively and taking"the demonstration effect"will be helpful in enhancing bank competitive power.The fifth chapter mainly introduced the entering process of foreign bank as well as what countermeasure our country should take facing banking industry's comprehensive opening. Our country began to introduce the foreign bank in 1979. It was the fast period of expansion of foreign bank entry from 1994 to 1997. From 1998 to 2001, the foreign bank entered the adjustment time. Our country joined WTO in 2001 and made timetable for the opening of bank industry, which promised gradually canceled foreign bank limit in 5 years. The implementation of " Foreign bank Act of administration of people Republic of china ", " Foreign bank Act of administration Executive regulation of people Republic of China " on December 11, 2006, meant the conclusion of 5 years'buffer period of our country entering WTO and the Foreign bank can get the same level national treatment. This symbolized that banking industry was already processing openness comprehensive. After analyzing the advantage and the disadvantage of Chinese Bank simply, we can make some suggestion for Chinese banking industry facing the comprehensive openness: First encourages the Chinese Bank enhance the competitive power rapidly through booting the innovation ability of financial product, the grade of service, the management level, the risk guard mechanism, and the methods of mix management. Next, the Chinese-funded bank must study the foreign bank's advanced managerial experience, the technique, the management method of risk positively. Finally, we must certainly strengthen and prefect finance supervision of supervisory departments. We also should establish supervision systems whose main content is risk supervision, on-spot check supervision. We must optimize the supervision organization establishment unceasingly, intensify the degree of unites supervision among Banking Regulatory Commission, Securities Supervisory Association, and Insurance Regulatory Commission, strengthen international cooperation. In a word, the Chinese Domestic capital Bank as well as the Supervisory department must take each measure to deal with banking industry's comprehensive openness positively.