This paper systematically investigates the development history of universal banking system in western countries, especially in Germany, compares the advantages and disadvantages of separate banking system and universal banking system, and analyzes the feasibility of universal banking in China by studying the background and current situation of banking industry in China.
First, this paper provides an overview of the development history of universal banking in Germany. The history of the German banking industry can be traced back to 19 century. Universal banks provide the full range of financial services appeared in the early 19thcentury. During the period of the financial crisis between 1929 and 1933, development of the universal banking was frustrated for the supervising authority imposed restrictions on the banks. In order to control financial risks, some regulations were issued to prohibit banks from dealing with securities business.However, universal banking system survived during adverse situations, and successfully dominated German banking industry. Secondly, this paper demonstrates characteristics of separate banking system and universal banking system, and analyzes the necessity and feasibility of universal banking development in China. The development of universal banking in the world has provided valuable experience for China.Therefore, in Chapter 3, we decide to use qualitative research method to analyze the feasibility of universal banking system in China, and in Chapter 4, the possible model of universal banks in China will be proposed. Finally, in conclusion section, we will summarize what we have deduced from analysis, and provide some suggestions in recommendation part regarding the supervision problem of banking sector in China.
Over the past a few years, the financial crisis have swept the globe, and many countries around the world failed in this crisis while the other countries withstood the severe test due to their financial systems. Although the banking industry in Germany wasinfluencedby this tremendous financial crisis, in general, the German financial system was not fundamentally undermined, and the financial markets of Germany still remained in a stable state. This is because, at present, Germany has a relatively unique competitive edge regarding the financial system, which is afinancialsystem, dominated by universal banking. In the long run, this universal banking system makes huge contributions to the German economy. By discovering the development of German banking system and comparing with other financial systems, we attempt to figure out what is unique at the universal banking system, and whether the success of this system can be imitated by China or not.
Chapter1. Introduction 2
Chapter2. Review of Literature 5
2.1 The characteristics of the separate banking 5
2.2 The characteristics of the universal banking 52.3 The necessity of the universal banking development in China 7
2.3.1 The motives for universal development of commercial banks in China 7
2.3.2 Universal management is the inexorable choice for the bank of China 9
Chapter3 Research Design and Methodology 12
3.1 Research Design 12
3.2 Methodology 12
Chapter4 Discussion 13
4.1 The development of universal banking system in America 13
4.1.1 The weakened Glass-Steagall Act 13
4.1.2 The passage of Gramm-Leach-Bliley Act 14
4.1.3 The implementation of Financial Services Modernization Act 14
4.2 The development of universal banking system in Western Europe 15
4.2.1 Universal banking system in Germany 16
4.3 Feasibility analysis on universal banking system in China 17
4.3.1 The practice of universal operation in banking industry in China 17
4.3.2 The constraints for the development of universal banking system in China 18
4.4 The optimal model for universal banking development in China 19
4.4.1 The optimal model for universal banking development in China: Financial holding universal bank 19
4.4.2 The feasible organizational forms of universal banks in China 20
4.4.3 The effectiveness and risks of the choice of financial holding universal bank in China 24
Chapter5 Conclusion and Recommendation 24
5.1 Overall Conclusion 24
5.2 The history of universal banks in Germany 25
5.3 Characteristics of different banking systems 25
5.4 The feasibility of universal banking system in China 26
5.5 Recommendation 26
The destination of separatingoperation and separating management is to build Fire Wall between commercial banks and securities companies, in case commercial banks continue to invest in capital market without any limit. By this way, risks are limited in certain industry without expansion into other industry, thus reducing systematic risks.Therefore, in terms of financial supervision, establishment of Fire Wall is the essential method to prevent risks from universal operation.
Based on the current situation in banking industry in China which can only support financial holding company as analyzed in previous chapters, the two main actions should be taken are building Fire Wall and supervision of capital. Five measures should be taken to govern and supervise the universal banking development in China.
1. Building strict Fire Wall
2. Limitations of connected transactions
3. Control of the concentration of risks
4. Requirements for qualifications of senior managers
5. Information closure of financial holding company
Overall, the dissertation states that the universal choice is a certain developing direction for banking industry in China. Compared with Germany, it is convinced that the only possible model for universal banking system in China is financial holding company. Whether the implementation of universal banking system can be achieved in China mainly depend on the regulations of government. Moreover, financial supervision has to be improved to ensure that the process of universal banking development in China can be successful.
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