A Study on the Relationship between Structure of Financial Supervision and Safety and Soundness of Financial System

• Main Authors: CHEN TSUNG-MIN, 陳琮閔
• Other Authors: CHEN CHIA-PIN
• Format: Others
• Language: zh-TW
• Published: 2005
• Online Access: http://ndltd.ncl.edu.tw/handle/90168335810787296358

碩士 === 國立中興大學 === 企業管理學系研究所 === 93 === ABSTRACT From 1986 to nowadays, the movements of international financial environments had been changing by each nation’s economic development around the world. Because bankruptcy and financial crisis shocked the financial sectors, the Basel committee on banking supervision has declared “the Basel Capital Accord, Basel I” and “the new Basel Capital Accord, Basel II” by sequence, which were constituted in order to improve safety and soundness of the financial system for every country. Each nation also examined and adjusted its mechanism of financial supervision to reach the goal of financial stability and pursue persistent economic growth. This research investigates the relationships on structure of financial supervision, central bank acting as a supervisor and the safety and soundness of financial system. The results show the existence of supervisory arbitrage by adopting multiple supervision in a country. Banks have incentives to seek lower equity/capital ratio, less non-interest revenue, more loans and cause the returns on average equity going down. Further, if the central bank acts as a supervisor, it can prevent banks from taking over-risky activities and becoming insolvent, which can compensate the weakness of adopting multiple supervision. Central bank’s acting as a supervisor would augment banks’ equity/capital ratio, non-interest revenue, security investment rate and decrease outstanding loans, then increase banks’ returns on average assets and returns on average equity. We also find that nations adopting partial consolidated supervision seem to contribute on banks’ performance. By coordinating to central bank’s supervision, their financial systems would be much stable. We conclude that adopting consolidated supervision would be a better choice to improve financial stability when universal banks, financial holding companies and even financial conglomerates boost. Key words: Structure of financial supervision, Central bank acting as a supervisor, Safety and soundness of financial system