Study On The Entry-exit Mechanism Of Private Banks

Private banks have been a hot topic in financial circles, problems associated with definition of private bank, real path, access-exit mechanism and other related issues have been much heated discussed. With the development of private economy in China, solving the bottleneck of private economy financing and optimizing financing structures have become an important issue; As a response to the incompetent channels of formal financing, the underground financial activities are developing rapidly. But because it has been beyond the country’s regulatory regime for a very long time, during which it was accompanied with loan-sharking and illegal activities, a good clear channel is in urgent need. After the accession to the WTO, China committed the full liberalization of financial industry. As to obtain the same national treatment with foreign investment, private capital tried to enter the banking industry, using their own advantages, to join the development with the state-owned banks and foreign banks. In this situation, it is imminent to construct our market access and exit mechanism.This paper uses the industrial organization theory of industry economics, starting from the private banking market access and exit barriers, to investigate the deficiencies in access-exit banking supervision of private banks, through the combined method of qualitative and quantitative analysis, with reference to successful experience in foreign countries, proposes a concept of construction in access—exit mechanism of private bank. This dissertation is divided into seven chapters.The first chapter is an introduction part, by studying the relevant literature, this chapter starts from the nature of fame and wealth from the private capital proceeding, it believes that the fundamental purpose that private capital entering into banking industry is the monopoly profits. But because of the special nature of the banking, it is needed to set an access-exit barriers regulation, so we discuss the access-exit mechanisms of private banking market in the following sections.The second chapter is paper’s related concepts and theories. Firstly, it defines the scope of application of the private banks, industry economics, the concept of entry and exit barriers. The definition of private banks mostly stresses the component of property rights and the rights such as operate and income right. According to Baume’s definition, remove the differentiation factors of economies and products in structural barriers of entry and the fixed species in absolute cost advantages, then bring in the institutional barriers.The third chapter empirically tests banking market concentration and market competition of China, using the structure of law SCP paradigm and non-institutional methods of PR model. According to econometric methods, from the perspective of the concentration, the article examines the market structure using the seller concentration ratio (CRn). Test results show that in2002-201211years, according to Bain’s classification of market structure, banking market structure developed from monopolistic competition type Ⅱ to type Ⅳ Empirically test the11years banking competition level by using non-structural method PR model, concludes that, H-statistics range of China’s banking sector is in monopolistic competition markets area. And then regression analysis of state-owned banks and joint-stock banks, it shows there is significant increases in banking competition, and this increases of state-owned bank is greater than in joint-stock banks, concluding that:private capital in banking industry can improve competition degree, while product and areas differentiation can reduce the possibility of over-competition. Access mechanism of private banks would benefit the diversion of deposits and loans, reduce market concentration, enhance the banking competition, thus enhance the performance of the banking industry.Chapter IV is policy system changes of private bank accessing market. Since private capital first entered into the banking sector till currently pilot process of private bank, found that dominant politic barriers to private banks are gradually reduced, at the current period. However, compared with the dominant politic barriers, there is a recessive politic barrier that is even more serious. During the specific activities, it needs to prevent from government setting up opportunities for rent, to avoid the recessive barriers under the political system loopholes.Chapter V analyses bank’s withdrawal market practice through cases. Large state-owned commercial banks do not apply the market exit, in other practices of bank mergers, closing, dissolution and bankruptcy; reveal some problems of banking market withdrawal mechanism in China. Based on these we found the shortage of bank market withdrawal mechanism.Chapter Ⅵ is learning from successful experience of foreign countries. Analyzed the banking market access mechanisms of the United States and Germany, we found that, first of all, there are universal and long-term existences of market access barriers, whose strength and institutional arrangements depend on economic development stage of a country. Secondly, adjustment of bank access mechanism should be put forward by financial needs, resulting in a natural development, rather than top-down directed regulators. An appropriate access mechanism comes from a result of natural games between banks and regulation governments. Finally, strengthen withdrawal mechanism go with reduction of access barriers. The reduction of banks’withdrawal goes with increase in access barriers. It needs continuously strengthen to lower the banking market access barriers in the banking market’s gradually open-up stage.Study on problem bank’s market exit mechanism, we found that, firstly, there is a sound legal system to guarantee banking market exit mechanism’s legal basis. Secondly, authorize specialized organizations to implement banking supervision within the legal framework. Thirdly, a wide range of exit means. Fourthly, market-based deposit insurance system; deposit insurance system’s mainly meanings of Private Banking are:in certain economic conditions, to protect the interests of depositors and guard the public banks confidence, and strengthen supervision of banks. Fifthly, there is a right and ultimate goal of market withdrawal. Through a number of deposit insurance guarantees and incentives, developed market economic countries attract better-run financial institutions bid on the exit bank merger, reorganize poorly managed banks, enhance the operation strengths, expand market share, and then improve the operational efficiency as an overall objective.Chapter Ⅶ is conception of access-withdrawal mechanism of private banking in China. First of all, in the economy especially in the private economy developed area, we set up private banks. In the first stage, we can consider to give certain support finance policies. So we can make full use of this demonstration effect of the newly established private banks. Secondly, we can carry out part of city commercial bank restructuring when the pilot banks gradually on track. Finally, when the market exit mechanism is mature, we can allow private bank to bank mergers.Considering the frame design of access mechanism of private banks in China, it is thought that the timing depends on the government’s grasping of the macro-economic forms and the realization of total goals of economic. We should take a cautious attitude to control the speed of market access:On one side, remain cautious on the opening sequence of private banks; on the other side, promote some pilot of private banks. In addition, put the multi-level license system into practice to control the access concessions of the private banks. On the requirements of the main body of private banks market access, besides regulating the minimum capital, we should also use the present corporate governance structure to control the ratio of single equity, to prevent internal controlled association with loan risks.On the design of exit mechanism of private banks, it needs to establish and improve relevant laws to authorize the executed department, perfect the system of last lender, construct the reserve system, and improve the system of bankruptcy liquidation. In addition, develop the related measures of private market access—exit mechanism, first of all, improve the supervision of legal system; Secondly, establish a risk warning system; Finally, promote interest rates market.