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Market constraints on commercial Banks

2018-10-29 来源: 51due教员组 类别: Paper范文

下面为大家整理一篇优秀的paper代写范文- Market constraints on commercial Banks,供大家参考学习,这篇论文讨论了商业银行的市场约束。市场约束即加强公众对商业银行的监督。如今在加强市场约束方面,强调限制公共部门处置有问题商业银行方式上存在的扭曲和加强商业银行信息披露。要使市场机制在对银行的管理者和所有者的约束中发挥重要作用,就必须满足一个基本条件。即不向有麻烦的银行自动提供资金援助,不向银行的所有者和主要债权人提供金额的保护。这种制度安排表明,那些被监管人只认定失去给付能力的银行应该及时地补充勒令退出,以防止单个银行出现的问题蔓延和危害其他银行。

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Market discipline means strengthening public supervision of commercial Banks. At present, in terms of strengthening market constraints, the two most emphasized points are: restricting the public sector from dealing with distortions in the way of problematic commercial Banks and enhancing the information disclosure of commercial Banks.

A fundamental condition must be met for market mechanisms to play an important role in binding the bank's managers and owners. That is, there will be no automatic financial assistance to troubled Banks and no monetary protection for the Banks' owners and main creditors. The arrangement suggests that Banks that have been regulated only to the extent that they are unable to pay should be required to withdraw in time to prevent problems at individual Banks from spreading and harming other Banks. Experience in many countries, for example, suggests that public sector support for troubled Banks is too generous. Although the practice of closing large Banks with the payment of compensation to most depositors is a fear of a general loss of confidence, it is useful to have the Banks' owners and main creditors bear a fair share of the financial losses. This would prompt better-informed primary creditors to impose market discipline on weak Banks. The advantage of this arrangement is that not only do big creditors have more money to monitor and influence Banks, but they also have access to more accurate information than others.

The appropriate role of the central bank lender of last resort is to provide timely short-term financial support to Banks that are illiquid but still solvent. Such loans are an important way to prevent bank panic and runs. Bank panics and runs can make healthy Banks illiquid. And lead to a decline in solvency. In practice, however, such loans often support insolvent Banks. This undermines the market discipline and the profitability of the banking system. The central bank did so because it feared a crisis of confidence in the banking system, and it was often hoped that troubled Banks would emerge from the crisis on their own. In order for lenders of last resort to function effectively, without compromising market discipline, the central bank would have to obtain sufficient information from regulators to determine which Banks were losing their solvency in order to provide funds to healthy but illiquid Banks.

In the event of a bank failure, the deposit insurance scheme will compensate certain classes of depositors. However, deposit insurance is prone to moral hazard problems, so it needs to be properly designed. The most effective deposit insurance schemes are limited to protecting small depositors and not covering large depositors and other creditors, including other Banks, in order to encourage market discipline to put pressure on Banks. Insurance coverage can vary from country to country. But a fundamental principle is that it must help curb moral hazard. The deposit insurance system needs to be adequately funded so that insured depositors can be paid on time and insolvent Banks can be shut down quickly. Credible exit policies for troubled Banks are essential for effective deposit insurance, lender of last resort arrangements, and a sound and competitive banking system. The financial system must be strong enough to keep the problem of failing Banks from spreading to other institutions in order for their exit to proceed smoothly. Banks should be closed until their solvency is severely compromised and their creditors are badly damaged. Even if these conditions are met, regulatory intervention is often needed to bring big Banks out of business, rather than simply citing liquidation. To reduce the political pressure on Banks to exit, the authorities should limit their discretionary powers and adopt rules-based policies.

Disclosing information about Banks and their operating environment to the public is an important means to enforce market discipline. The value of disclosure depends on the credibility and accuracy of the information provided.

Banks are often required to publish information on credit and credit risk, such as risk concentration and relationship lending by category. The customer should also be able to obtain quantitative information on the relationship between the loan and total assets, non-performance loans and the lender's provision. The bank should also explain the definition of loan classification, classification standards for non-performing loans, and standards for the treatment of reserves or reserves. In addition, information on loan write-offs and repayments is also important.

Liquidity risk can be explained through the balance sheet and the enclosing balance and liability maturity structure. This information should enable the client to distinguish between a more stable core deposit account and a less stable purchasing fund account. The information should also indicate which assets can be moved at any time, so that the level of off-balance-sheet commitments can be met.

Banks should disclose all substantive areas of market risk. As a minimum requirement, interest rate sensitive assets, liabilities and off-balance sheet items shall be included in each term. It should be based on the risk profile of the portfolio. Disclosure of risk exposure equity and commodity price risk exposure for major foreign exchange and risk exposure related to various investment transactions. If you use derivative hedging. The bank should also explain the hedging techniques it USES.

Information on benefits can provide important information about long-term prospects. In this way, the client can get the main revenue source and expenditure direction, and calculate the key indicators such as earnings per share, average return on assets and efficiency ratio.

Public disclosure is usually achieved by quantitative and qualitative information released in annual and quarterly financial reports. In addition, Banks can release other information, such as shareholder proxy statements, quarterly earnings and dividend announcements. Financial media can also publish their views.

Given the sensitivity of bank liquidity to public opinion, Banks are always reluctant to provide bad information. So when the message is not positive, there is a sharp conflict between market participants and bank managers. This situation can be addressed directly through laws or regulations, the direct way being mandatory minimum disclosure requirements. In addition, peer pressure for strong market participation can send this situation indirectly, since disclosure is good for raising funds, meaning that such disclosure makes potential investors and depositors more likely to provide capital and deposits.

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