Too Small to Survive and Its Solutions in the Context of Common Prosperity
Financial regulation in China aims to mitigate systemic financial risks.This objective is pur-sued through a strict regulation policy,which manifests in heightened amounts,intensities,and concen-trations of regulatory norms.The complexity,repetitive nature,and uncertainty of regulation have led to increased compliance costs for commercial banks,thereby reducing their profit.Most regulatory norms in China adopt the mode of one size fits all,not obviously accounting for differences in bank sizes or offer diversified regulation.Small banks are more prone to operational difficulties than large and medium-sized banks,in severe cases,they may seek mergers in financial markets or enter bankruptcy proceedings,thus causing the problem of too small to survive.Finance serves as a vital instrument for fostering common prosperity,with small banks playing a crucial role in promoting inclusive finance.Consequently,failing to address that the too small to survive could have severe repercussions.One solution involves transitioning from the current asset-based definition to activity-based definition.Another solution to overcome this problem is to apply the principle of proportionality to banking regulations.
common prosperitybanking regulationtoo small to survivethe principle of proportionality
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