Market Discipline in the Post‐Crisis Banking System: A Proposed Collaborative Approach and Its Theoretical Application in China

Date of Award


Document Type

Dissertation - Closed Access

Degree Name

Doctor of Juridical Science (S.J.D.)


Duke University School of Law


Banking, Market discipline


This dissertation focuses on an urgent need to rethink the role of market discipline in the regulating of the contemporary banking ecosystem, in the light of the implications of the Global Financial Crisis and the recent developments in global financial reforms. It proposes a new regulatory approach, the “Collaborative Market Discipline”, developed upon a review of the current literature on banking regulation, and the revisiting of complexity theory and New Governance scholarship. This novel approach aims to help policymakers harness the disciplinary power of financial markets through a theoretical framework, and a collaborative regulator‐industry process of standards‐setting. It is then applied to the Chinese banking system, arguably the world’s greatest potential source of financial instability. It is hoped that the policy recommendations that emerge from the theoretical application of the proposed regulatory approach can help inform the ongoing financial reforms in China.

This dissertation contributes to the literature in the following respects: First, it fills a gap in the literature by offering the first post‐Crisis, systematic review of market discipline theory. Second, it proposes an innovative, operable regulatory approach to help policymakers vitalize market discipline through enhancing regulator‐industry collaboration. Third, it presents a re‐visitation of the market nature of the contemporary financial ecosystem through the interdisciplinary lens of mainstream market hypotheses and complexity theory. Fourth, relying on the principles of New Governance scholarship, it makes out a case to posit the urgent need for the better balancing of the powers that govern the modern financial ecosystem. Fifth, it offers an overarching review of the post‐Crisis evolution of the Chinese banking system and its regulatory landscape. Sixth, it conducts an in‐depth investigation of the Chinese shadow‐banking system through a logically consistent analytical framework. Lastly, it advocates that market discipline must be the pivot in the addressing of the primary regulatory challenges in China, and that adoption of the proposed Collaborative Market Discipline will serve as the operational framework of that pivot.

Library of Congress Subject Headings

Banks and banking--Law and legislation