In Western Economics: A Brief Account of the Evolution of the Financial System

Due to the differences in the size of the economy, technology, and political and cultural customs and historical background of countries, the financial system, or the form of existence of financial institutions and financial markets and their contrasts (financial structure), can be very different in different countries. Theoretically, in order to explore the impact of the design of the financial system on its function, the financial system has been divided from different angles. Currently accepted by academics is the "bank\|based" division based on the different roles played by financial intermediaries (banks) and financial markets in the financial system, represented by Germany and Japan, and the "market\|based" division represented by the United States and the United Kingdom. \|In the eyes of many scholars, there are significant differences between these two institutional designs of the financial system in terms of the mechanism and efficiency of the realization of the (financial) functions of capital pooling, risk allocation, information processing, and corporate governance (Allen and Gale, 1995, 1997, 2000; Thakor, 1996; Levine, 1997; Thakor, 1997; Thakor, 1997; Thakor, 2000). 1996; Levine, 1997; Rajan and Zingales, 2003a). Of course, there are many other categories of differences in the financial system outside of this type of division in the academic community.

The European financial system, represented by Germany, has generally been regarded as an example of a bank-dominated model. But this judgment no longer seems to accurately describe the reality of European finance at present. In the past 20 years, Europe's traditional commercial bank-led financial system has undergone an extremely profound "structural change", or relative to banks and other financial intermediaries, the European financial markets as a whole, both in terms of its market size (such as market capitalization, turnover, etc.) or the diversity and complexity of its securities products, and so on. And other aspects have been extremely obvious changes, resulting in European enterprises to "keep the distance type mode" of transformation, "market-oriented" has become the evolution of the European financial system irreversible development trend. So, the European financial system in the past 20 years what changes have occurred? Do these changes mean that the European financial system is from the traditional "bank-led model" to the United States "market-led model" change? For Europe, is this financial change beneficial or harmful? This paper attempts to review the European financial system in 20 years on the basis of change, to do a more in-depth, systematic analysis of the relevant issues.

If compared with the United States, Britain and the United Kingdom, the European financial system in the early 80's, the continent shows a very obvious bank-led model, or that the development of its financial markets lagged behind the development of financial intermediaries, such as banks, in addition to the payment system has a liquidity provision function, savings mobilization, the allocation and flow of funds, the management of risk, as well as incentives to monitor the problem of the function is also mainly centered around the banks and other financial intermediaries to achieve, while its market, and its financial intermediaries to achieve. Financial intermediaries to realize, and its market due to the size, structure and price (information) efficiency and other factors, its due economic function objectively greatly inhibited.

II The starting point of change: the European financial system in the early 1980s

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Three The dynamic evolution of banks and markets: the basic manifestations of financial change in Europe over the past 20 years

(i) Markets and banks after the transformation of the European financial system

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(ii) The European banking system

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(iii) European capital markets

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(iv) The dynamics of European banking and capital market links

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IV Analysis of the dynamics of structural change in the European financial system

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V Financial change and the European economy: an analysis of effects

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VI Conclusion

In the last 20 years or so, along with the rapid expansion of European financial markets and the relative weakening of their banking position, the continental European financial system has undergone a profound structural change. In a sense, the emergence and continuation of this change in the European financial system is a series of favorable international conditions, economic conditions, as well as political conditions superimposed on the inevitable result. In practical terms, the change was more than just deregulation: new financial instruments were created, new financial markets were added, and there was a consensus on the importance of allowing every broker to hedge his financial risks. The problem, however, is that although financial change in Europe is now continuing, opposition to change has not subsided within Europe because of possible asymmetries in the current distribution of the positive effects of change across countries, and there is still a lot of uncertainty about the future changes in the European financial system. The evolution of the European financial system will have a non-negligible impact on the change of the global financial system, we need to continue to track the future changes in the European financial system in order to truly understand the impact of the current change and provide lessons for China's financial system reform.