Change Of Bank Control

Bank plays an important role in financial system, and bank regulation, which aims at maintaining the stability of bank's function, is a significant problem in financial theory study and practice. A lot of papers, domestic and abroad, have studied on many issues, such as the rationale of bank regulation, differences of regulation system between different countries, and the implication of foreign regulation practices. But few studied on the causes of bank regulation transformation. As a special goods supplied by government, the output of bank regulation are affected by demands and supply. Based on the demand and supply analysis, this paper tries to explain the deep cause of bank regulation transformation, and give some advices about reform to the regulation, which faces critical challenges in the coming new economical environments.Bank regulation started at 19th century, when the Bank of England has monopolized the issuance of bank notes. And after the Great Depression, regulation has fully setup. In the liberty waves of 1970s, there is a trend of deregulation. But suffered from some bank crises of 1980s, governments start the re-regulation process.In order to recognize the deep cause of regulation transformation, we need to understand the demand and supply of regulation first. Generally, demands for regulation come from market failure, fragility of bank system, government failure and economy of scale. These factors explain why there are needs for bank regulation. And the supply contains regulation laws and regulatory agencies. Government established laws to restrict behavior of banks, and regulatory agencies supervise the implementation of these laws. And so, there is supply of regulation.Transformation of regulation depends on the equilibrium of demand and supply. In short term, regulation market may have different states, for public can't change the quantity of supply. When market quantity is around the intersection point of demand and supply curve, then there is equilibrium. When the quantity surplus the equilibrium, there is an over-supply, social welfare is undermined. And when the quantity is smaller than the intersection point's amount, there is a supply insufficiency, and social welfare is not maximized. If insufficiency lasts too long, possibility of bank crises increased.In the long run, if bank regulation is over supplied, banks will take actions to escape from it, and people whose interests are undermined by this will force government tochange its regulatory policy. And if there is a long lasts regulation insufficiency, society will threatened by bank crises, and government has to strengthen regulation. In one word, there is a trend for supply to return to equilibrium in long term.The interactions and developments of demand and supply drove the transformation of bank regulation: the understanding of demand and the instant requirements led to full setup of bank regulation, concerns of supply cost evoked deregulation tide, and the balance of demand and supply accelerated re-regulation. Regulation, deregulation and re-regulation are not a simple repetition but a cognition deepening process based on the consideration of demand and supply.Today, many things, such as financial globalization, growth of international bank, the use of new technology and the emergence of financial conglomerates, have challenged the bank regulation. Reforming the regulation system and enhancing the efficiency of regulation supply, are critical to stability of bank system.How to reform bank regulation, this paper discuss it in both demand and supply side. On one side it is improving of regulation supply, which means reduce supply cost and change its structure. To achieve these goals, measures like transformation of regulation patterns, harmonization of international regulation, political will and regulation provide by non-government organization should be taken into consider.On the other side we may consider the problem from demand point. Market is the mechanism to distribute all kinds of resources and regulation is just a supplement measure in case of market failure. If we can decrease the demand for regulation, the market will be less distorted. This paper discusses two ways to achieving this goal, one is improving of bank internal control and the other is enforcement of market discipline.As to our country, bank regulation, which has undergone several transformations, need reformed in the new, fast changing economy environment. Regulated by law, reforms of regulation agencies, cooperation with international counterpart and formation of information closure mechanism are crucial to our country's bank regulation development.Keeping transform and improving the efficiency of supply to meet demand, then bank regulation's aims will be achieved.