The Research On City Commercial Banks’ Withdrawal From Market

Along with the opening up of financial market, many foreign banks flock in，thecompetition of commercial banks is more fierce. As the local joint-stock commercial bank,city commercial banks have less competitive power because of a small development scale anda not perfect management system. Some local governments often make use of the bigshareholder’s status to influence the management of city commercial banks. As a result, somecity commercial banks have high bad loans, facing the risk of collapse.Under the conditions of market economy, city commercial banks can enter the financialmarket, at the mercy of competition law "survival of the fittest", if bad management harms theinterests of depositors heavily etc, the bank should withdraw from market. In1998, the centralbank announced Hainan development bank shut down. However, after more than10years ofrestructuring, so far, Hainan development bank has not really withdrew from market. Why itis difficult for the city commercial banks to withdraw from market, there are two majorreasons: First, The legal system is not sound, a systematical legislation to deal with citycommercial banks’ withdrawal from market has not been formed. Second, due to the lack oflegal system, the central bank, local government etc, take a great part in the city commercialbanks’ withdrawal from market and assume a lot of responsibilities, thus, resulting in thegame between them, which eventually blocks city commercial banks withdraw from market.At present, commercial banks’ withdrawal from market in our country actually refers tothe city commercial banks withdraw from market. Combined with the analysis of citycommercial banks and the practice of withdrawal from market, we can have more profoundunderstandings for the specific problems that the commercial banks facing, and provide morepractical suggestions for the perfection of the legal system. This paper will be divided intofour parts:Part one, elaborates the city commercial banks’ background and development situation atpresent. It aims to show that in growing competition of banks, the possibility of citycommercial banks’ withdrawal from market and the necessity of study on it. Part two, Basic theory on city commercial banks’ withdrawal from market, It mainlyrefers to the definition, forms, significance and problems that the practice of city commercialbanks’ withdrawal from market reflects. This paper argues that withdrawing from market ofcity commercial banks has such problems: city commercial banks are hard to withdraw frommarket, the methods of withdrawing from market are not sound and the protection ofdepositors does not reach the designated position, etc.Part three, this paper expounds the legal system obstacles of city commercial banks’withdrawal from market. First of all, the legal system about commercial banks’ withdrawalfrom market is dispersed, the methods of withdrawing from market are not operational, andnot form a systematical procedure. Second, city commercial banks are influenced by localgovernments, both banking regulators and the central bank regulators have high degree ofparticipation, however, current legal system do not define the relationship between them,which leads them to block the city commercial bank withdraw from market. Finally, the lackof our country depositor benefit protection system, not only makes the interests of thedepositors do not get good security, but also affects the entire mechanism of city commercialbanks’ withdrawal from market.Part four, the route choice and completion of systems about city commercial banks’withdrawal from market. The author thinks it is good to choose the merger way, and not rejectthe way of bankruptcy, if the city commercial banks withdraw from market smoothly. Thelegal system should define the responsibility of all parties, to reduce the obstacles commercialbanks’ withdrawal from market faces, withdraw when necessary, to optimize the allocation offinancial resources. In addition, city commercial banks’ withdrawal from market also need theperfection of deposit insurance system and the lender of last resort, which guarantee the citycommercial banks withdraw from market.