Explored To Improve The Effectiveness Of Banking Supervision

This paper, starting with the exposition of the Principal-Agency Model, is to analyze"Agent question"in the supervision and management of banking and its influence to the effectiveness of banking supervision, and find solving approach to form a regulatory mechanism of incentive compatibility in the supervision and management of banking. Through analyzing reasons for the low effectiveness of banking supervision in china and referring the regulatory experience of the developed countries and regions, this paper raises approaches and recommendations of forming a regulatory mechanism of incentive compatibility in supervision and management of Chinese banking.This paper contains six chapters:In the first chapter , the basic theories of the supervision and management of banking and the research of incentive compatibility mechanism are introduced , which lay a good theoretical foundation for the further investigation into supervision and management of banking and incentive compatibility mechanism in banking supervision . There are The Public Interest Theory, Economic Theory of Regulation Capture Theory and so on. These theories explain reason and importance of the supervision and management of banking from different perspectives.In the second chapter, the paper analyzes the Principal-Agency Relationship in banking. The Principal-Agency Relationship is contractual relationship, in which the principal design a compensation system to impel the agent actions that meet the principal requirements. But , there may be"Agent question", which means that the agent actions probably can not meet the principal requirements because of different targets and asymmetric information .