Money, banks, and the commercial banking law: a framework for law and economics analysis

Tao Xi

Chapter 2 in Regulatory Reform in China and the EU, 2017, pp 13-37 from Edward Elgar Publishing

Abstract: In this chapter we look at the regulation of the commercial banking sector in China, which has been heavily relied on to meet the needs of domestic firms. Due to significant government ownership of banks, the role of the market is still rather limited as far as domestic banking is concerned. Against the background of a recent attempt of the central government to liberalize its banking sector, we analyse and propose a systematic reform plan to solve the incompatibility between the current regulatory framework and ‘normal’ business practices. First, the comprehensive management of commercial banks raises new challenges and no longer fits with the separate regulation of different financial sectors. In addition, there are significant conflicts between market incentives and national industrial policy when commercial banks extend their loans to companies with a high share of state ownership. Public regulators often make business decisions for commercial banks, and this should be restrained. Finally, the implicit governmental guarantee for deposits in banks generates a moral hazard problem for domestic banks. We recommend that commercial deposit insurance should be established.

Keywords: Asian Studies; Economics and Finance; Law - Academic (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.elgaronline.com/view/9781785368530.00007.xml (application/pdf)
Our link check indicates that this URL is bad, the error code is: 503 Service Temporarily Unavailable

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:elg:eechap:17175_2

Ordering information: This item can be ordered from
http://www.e-elgar.com

Access Statistics for this chapter

More chapters in Chapters from Edward Elgar Publishing
Bibliographic data for series maintained by Darrel McCalla ().