Banking Regulation, Competition And Banking Performance

One of the most exciting areas in the economic policies is the government regulation and anti-monopoly. In the past thirty years, China's banking sector has changed a lot in many aspects, such as the substantive relaxation of regulation, competition applied and the changes of the rules of banking supervision. The changes of regulation and completion will inevitably have a profound impact on the banking industry and the whole economy. So studying the complicated aspect of regulation and competition to banking performance will become the focus of the attention of government and academic world.Reviewing the study in home and abroad, many papers researched the influence with only one factor. The study in the complicated influence is very rare. Many scholars abroad realized this problem and researched this problem by theoretical model and empirical analysis. Because of the different backgrounds, the results scholars concluded are not alike. With regard to our country, the papers about the problem are much rarer. As the result of China's banking sector at this stage is in a deregulation and increased competitiveness, studying the influence to the banking industry become the theoretical and practical needs. Based on this, I try to find the relationship among them by theoretical analysis and testify the correction of the theoretical analysis by empirical analysis which uses the banks as samples in Shan Dong province.In detail, the theoretical research finds the relationship among the three through theoretical analysis and model. Theoretical analysis is based on two hypotheses of industrial organization theory. Theoretical model study the relevant among them by adding restrictions on the interest rate on the basis of previous research. Empirical analysis respectively testified the regulation, competition, and the combined effects of both on banking performance using multiple regress ional methods. Sum up the results of theoretical study and empirical tests, this paper has been drawn competition improving performance, supervision hindering banking development and the combined positive effects of both to banking performance.Based on theoretical analysis and empirical tests, this paper argues that the monopolistic situation in China's banking sector is not conducive to banking development. The government can take some measures to relax the threshold to enter to the banking industry. So the banking performance can be improved by competition. At the same time, on-site examinations and capital requirements have negative impacts on performance. This reminds the regulatory government should improve regulatory and supervisory efficiency in order to promote the bank values and maintain a sound foundation. Last, I found the complicated impact of the competition and regulation is positive to banking performance. This indicates that the government may relax the restrictions on opening branches in other areas based on the appropriate regulations. So managers of banks can improve the operation and management and pay attention to financial innovation in order to improve business performance.