The Influence Of Deposit Insurance System On The Stability Of Banking System In China

On November 12 2013,CPC Central Committee studied certain major issues concerning comprehensively deepening reforms and determined economic system reform as the major part of comprehensively deepening reforms strategy in the Third Plenary Session of the 18 th CPC Central Committee.On May 1 2015,the deposit insurance system was established officially which is the key point of economic system reform.The deposit insurance system has played a significant role in influencing the stability of the banking system,completing the market-based exit system for financial institutions and refining the national financial security network.Therefore,through the discussion of the operating mechanism and the effect to the stability of the banking system of the deposit insurance system in China,the author hopes to provide some references to improve the deposit insurance system and formulate proper policies and regulations.First of all,on the basis of reviewing the status quo of domestic and foreign deposit insurance system and the related models which could measure the stability of banking system,the author analyzes the positive and negative effects of deposit insurance system and puts forward his own opinions on how it influences the stability of the banking system in theory.Secondly,by making use of economic data of 15 domestic commercial banks from 1st quarter of 2013 to 4th quarter of 2017,the author builds the balance panel data models categorized and studies the impact of the deposit insurance system on the stability of the state-owned commercial banking system,the joint-equity commercial banking system and the overall commercial banking system.The results show that: to the joint-equity commercial banking system and the overall commercial banking system,the state-owned commercial banking system is higher in stability and smoother in fluctuation.The negative impacts of the deposit insurance system are more than the positive impacts,which lead to a declinein stability of the state-owned commercial banking system.In contrast,the stability of the joint-equity commercial banking system and the overall commercial banking system rise as the negative impacts of the deposit insurance system were less than the positive impacts.Overall,the author puts forward the following suggestions :Firstly,an independent deposit insurance fund management organization should be established.Secondly,the supervision and management to the joint-equity commercial banks should be strengthened.Thirdly,the rise on stability level of the state-owned commercial banks should be focused on the administrative means at current stage.Finally,the quality structure of GDP is more important rather than the mass growth.