The Bank Insolvency Regime in China:A Principle-Based Study of Its Requirements, Current Challenges, and Future Directions
This thesis examines the Chinese bank insolvency regime, focusing on the practical application of the legal framework in addressing bank failures. To achieve this objective, the thesis primarily employs a doctrinal analysis with a comparative perspective, specifically referencing the Anglo-American approach to bank insolvency. Additionally, to address gaps in the existing literature, the thesis includes an empirical analysis of numerous Chinese bank insolvency and restructuring cases, complemented by insights from seven interviews with judges and lawyers involved in these cases, as well as banking officials and staff.
The thesis presents five key findings. First, Chinese administrative powers play a significant role in addressing legal gaps to ensure that insolvent banks exit the market in an orderly manner. Second, initiating formal bank insolvency procedures in China is highly challenging, and court-based insolvency proceedings are rarely used. This is because the current intervention of administrative authorities in bank insolvency cases aims not only to facilitate an orderly market exit for insolvent banks while maintaining financial stability but also to rescue failing banks. Third, current bank resolution processes consume substantial public funds, potentially increasing moral hazard within the Chinese banking sector, as the mechanism for raising funds from the private sector is not well established. Fourth, bank insolvency cases encounter issues such as unfair repayment to certain unsecured creditors and the misuse of power due to political influence. Fifth, concerning depositor protection during bank insolvencies, although administrative interventions often result in higher compensation to depositors compared to the Deposit Insurance Regulation 2015, the compensation process is sometimes delayed in cases of bank failure.
As a result, the thesis provides recommendations to address the weaknesses in China’s existing legal framework and practical shortcomings. It also highlights that the current Chinese approach to bank insolvencies relies too heavily on government intervention, likely creating a path dependency that hinders the development of balanced and independent laws.
History
Supervisor(s)
Horace Yeung; Mark HsiaoDate of award
2024-12-19Author affiliation
Leicester Law SchoolAwarding institution
University of LeicesterQualification level
- Doctoral
Qualification name
- PhD