Mixed Operation And Banking Crisis

Do countries with regulations that impose tight restrictions on the ability of commercial banks to engage in securities, insurance, and real estate activities have more stable financial systems? Do countries that restrict cross-shareholdings between banks and non-bank financial institutions have more stable financial systems? Even the debate between scholars and financial regulators lasts nearly a century, there is no unified answer. During the 1990s, Mixed Operation of financial industry became increasingly a trend within the world. While the world's biggest investment banks had been hit hard during the subprime mortgage crisis of 2007, which makes countries regulators rethink which is better:the mixed operation, or separate operation?To answer this question, this paper makes empirical research with the data of mixed operation and bank crisis among 150 countries and the data lasts from 1980s to the early 21st century that global banking crisis occurred frequently. Inspecting the restriction on mixed operation among countries from activities and shareholdings, this paper uses Zero-Inflation Poisson regression and Ordinary least squares method to study the relationship between bank activity restrictions and banking crisis occurrence frequency, the loss of output and the duration of the banking crisis respectively. The empirical results support deregulation of the securities-related activities of bank, also support deregulation on bank holding non-financial institutions, but against the non-bank institutions holding bank; Meanwhile, a country with at least a regulatory institution for all financial sectors will significantly reduce the possibility of banking crisis, and can get out of the systemic banking crisis easily.Although it supports separate operation in the law of China, there have been a lot of financial holding companies actually. Some financial holding companies gained rapid development because of its comprehensive business advantage, while some had difficult operation or even went bankruptcy because of fast asset inflation. Therefore, as mixed operation becomes the current trend, our urgent tasks are:to set the legal norms about examination and approval procedures of mixed operation as soon as possible; to formulate mixed-business area; to establish a better financial regulatory system to adapt the present mixed operation situation as soon as possible.