Foreign Banks Market Exit Mechanism

Finance is the core of the economy. Foreign banks have become an importantpart of our financial market. Their withdrawal from the market impacts on thedevelopment of China’s banking industry to certain degree. Market withdrawalmechanism for foreign banks is critical to maintain financial market stability.However, the majority of study of foreign-invested banks in China concentrates onmarket access and management. Market withdrawal for foreign banks in China ismainly government-led. Study on this part is relatively fewer and less fruitful. Studyof foreign banks in the market withdrawal mechanism in depth and analyses of thatin the markets in the United States, Britain, Japan and other countries can helpestablish and improve our own market withdrawal mechanism for foreign banks. Themain contents of this paper are divided into four areas.This paper is based on several aspects. First, it demonstrates not only themeaning of foreign banks, how they are organized but also in details why and howthey withdraw in our market. Second, the paper focuses on two regulatory regimeson market withdrawal for foreign banks, which are the deposit insurance system andthe international lender of last resort. Comparing pros and cons of these two regimesprovides reference to how to improve our market withdrawal regulatory regime,strengthen the supervision of the operations of foreign banks and protect the funds ofdepositors in our country. Again, introducing market withdrawal mechanism in theUnited States, Britain and Japan and comparatively analyzing different ways foreignbanks withdraw from the market regulation provide adequate theoretical basis toestablish our own market withdrawal mechanism for foreign banks. It helps predictthe potential risks and prepare us when they happen. Finally, the purpose of thisstudy is to discuss the market withdrawal mechanism for foreign banks in China.Although it has been a while since foreign banks entered our market, our countrystill lacks a sound market withdrawal mechanism for foreign banks, which can beseen from the status quo and relevant legal system. The paper points out the existing problems of the market withdrawal mechanism for foreign banks in China, clarifythe purpose of setting such mechanism and regulators, and recommends how toestablish a sound market withdrawal mechanism for foreign banks.The innovation of this paper lies in two parts. First, the purpose is innovational.By learning from experience of market withdrawal mechanism for foreign banks inother countries, the paper analyzes such developing mechanism in China. Second,based on the analysis of such mechanism in foreign countries, the author seeks tointegrate the use of theoretical analysis and comparative analysis to do an in-depthresearch on the development of market withdrawal mechanism for foreign banks inChina.