Research On Risk Control Of Enterprise Group Finance Companies

In recent years, with our rapid economic development, the scale of business continue to expand, gradually formed a number of large enterprises or groups with strong operating strength and higher level of profitability. And they show the trends of gradually development and growth. Financial companies as the financial institutions within group, has played an important role in enterprise’s Group Management, Integrated operation, enhancing the Group’s core competencies and competitive strengths. The establishment and development of financial companies is adapted to the inherent requirements of rapid development of enterprise groups, and it also conforms to a wide range of financial deepening reform and the development of financial diversification trends. As a financial institution, financial companies should accept the supervision and management of CBRC, the central Bank and other external regulatory bodies. Also as a subsidiary of Enterprise Group, financial companies must comply with the Enterprise Group’s overall development strategy and business objectives; accept the leadership of Enterprise Group and executive the unified financial strategy of the Group. At the same time, financial companies as a business entity with independent corporate governance structure, it should meet the regulatory requirements of the financial sector and financial corporate governance rules. Dual regulation of internal and external business environment put forward higher requirements for the financial company’s management unlike other financial institutions and other sub-group of enterprises. With the centralized funds, the risk of financial companies gathered simultaneously. This increased the difficulty of financial company’s risk control and regulatory requirements. In this paper, financial companies were positioning accuracy, for how to understand the functional role of financial companies. This characterization has not only respect the rules of corporate governance of financial, but also give full play to the role of a finance company in serving the development of the Group. It has not only satisfied the financial industry regulatory requirements, but also conducted a special study from the perspective of how to perform its regulatory duties the responsibilities of investor starting problem.The financial companies of our country is financial institutions which applied by the enterprise group, major invested by the enterprise group member, approved by the China Banking Regulatory Commission, and provided financial services to members of the Enterprise Group. China Banking Regulatory Commission positioned the function of financial companies as follows:" It is he Non-bank financial institutions which to provide financial management services for the members of Enterprise Group with the purpose of strengthen centralized management of group funds and improve the efficiency of use of funds in the enterprise groups." According to the Group Development Strategy and different management methods, with combined Requirements of CBRC, Various enterprises located the main function of finance company in centralized management of funds and internal settlement functions, financing function, investment management functions, capital control functions, investment bank-type intermediate and financial advisers Functions etc.In the new century, Enterprise Group has started a new management practice of establishing a group management and control model, enhancing the operational capabilities of group and improving the level of group management. The core group management is the concentration and unified configuration of financial resources. Funds reflect as the value of financial resources, is a key factor in group management. Finance company as platform for centralized management of funds is the core of group management. The role of financial companies mainly reflected in improving the efficiency of resource allocation, promoting the achievement of Group Development Strategy, integrating internal resources, maximizing the realization of the overall value of the Group, constructing the centralized management and control system, controlling of financial risks, playing the role of financial services and enhancing the competitiveness of enterprise groups etc.In this paper, the structure is divided into eight parts. The main contents of each part are as follows:At first, it is general discussion. Starting from the research background, this paper introduces the basic concepts and the main features of financial companies. We analysis of the theoretical basis of financial companies combined the internal capital market theories; Transaction cost theory, financial intermediation Theory and Value chain theory etc. It presents the main function of finance companies, and described the purpose, content, methods, difficulties and problems and results of research of the study subjects.The second point is the comparison of development status and business model in the foreign financial companies. Through the introduction of production and development, function position, business scope, current situation and business risk in U.S. model and UK model of financial companies, and also through the comparative analysis of two operating modes and regulatory approach, in this paper, we proposed the reference of Development in our Finance Company. That is: we should broaden access sources of funding finance company, encourage business development and innovation in domestic financial company and enforce differentiation regulation.The third section describes the development of domestic financial companies. With the domestic financial companies’4stage of actively explore, gradually standardizing, function adjustment and steady development, this paper analyzes the main characteristics of the development of the domestic financial company presented such as the scale of development is not balanced, investors to diversify, mainly rely on internal sources of funds, business model based savings and loan and settlement, centralized model and diverse funding and Gradually standardize corporate governance. The article also points out the major domestic financial constraints faced by the company, including the location and function of regulatory policy does not converge, centralized funds of listed companies faced policy barriers, the new credit policy and authorize the payment of a larger policy implications, deposit reserve ratio is too large, limited scope, fewer sources of funds and a single business model etc.The fourth part is the Function Analysis of Financial Companies. According to the function of the Finance Company by CBRC, this article describes the management model and functional position of the finance company by enterprise group, and also analysis the main factors in influence locating function of the finance company. By Comparative analysis among Finance Company, bank, trust, fund settlement center and other financial institutions, this paper proposed the financial companies function of State-owned Assets Management Committee and discussed the future trends and prospects of financial companies.The fifth part is the key analysis of finance companies’ business. This article focuses on the introduction and analysis of financial company’s credit business, leasing business, securities investment business, buyer’s credit and consumer credit business, classification and management of deposit-taking business, commission business, clearing operations and bond underwriting business etc. And some of the key business processes are also described.Part VI is the finance company’s risk management. This paper described sisterly the system risk, liquidity risk, operational risk, credit risk, policy risk, interest rate risk and exchange rate risk that the financial company faced. This paper focuses on the financial company’s main business risk control methods and made a sound risk evaluation system for finance companies as policy recommendations under the current risk assessment system, also from the evaluation standard, the Group’s risk management of financial companies, etc.Part VII is about the internal control system of finance companies build problems. Combined with the financial status of internal control, this paper analyzed the main problems of internal control in the financial companies and proposed the eight principles of internal control system in financial company. This article also clearly specificities the financial internal control system of the finance companies from the aspects of establish a sound governance structure, regulate the licensing mechanism, foster good corporate culture, establish an effective information system, improve the internal control system, sound risk prevention mechanism and build an effective early warning system etc.Part VIII discusses the regulation of financial companies. Combined with the industry regulator China Banking Regulatory Commission, this paper analyzed the China Banking Regulatory Commission’s industry regulatory functions and regulatory concepts and methods and pointed out the constraints existing in the industry regulator. It also analyzed the three relationships between finance companies and group companies, finance companies and group finance department, finance companies and member units within the Group, so as to clear enterprise group finance companies to strengthen regulatory requirements. Finally, the study proposes policy guidance and regulatory ideas that SASAC to guide investors to the central point of the healthy development of corporate finance company. It is a new model which is different from the China Banking Regulatory Commission financial regulation and corporate control of Group’s business. Our research proposed a regulatory system from the aspects of clearly the central business regulatory requirements of financial companies Group, combined with the industry authorities to carry out risk assessment and inspection, establish the record management system for important matters of financial companies, Carry out special audits and establish an accountability system for loss of assets etc.