On Theory And Practice Of Conglomerated Financial Operations

The advent of THE LAW OF MODERNIZATION OF FINANCIAL SERVICES in the United States declared the end of the long-tem separated financial operations in developed countries, and conglomerated financial operations have been the mainstream trend of the financial industry worldwide. After the entry into WTO, China's financial institutions are at a competitive disadvantage because of their separated operating mode, while the foreign rivals can actually operate in diverse fields like investment banking and insurance. At present, the domestic financial academe is still in a heated debate on the pros and cons of conglomerated financial operations. But the inherent requirement for conglomerated operation is urgent for domestic financial institutions, and some hybrid financial products have already been developed and the financial holding companies have actually come into existence. This paper illustrates whether China can and how to develop conglomerated financial operations and tries to persuade the financial supervising authorities to accept the conglomerated operating mode by providing some approaches.By adopting the theory of institutional economics, combining with several research methods, and taking the practice in China as well as making use of the foreign experience, this paper illustrates the reasons why separated operations are going down, and the comparative advantages, general rules and techniques of conglomerated operations. The paper also analyses the conditions and obstacles of developing conglomerated operations in China, and puts forward policy proposals and choices. In addition, this paper discusses the functions, risks and supervision of the financial holding companies. The main contents include: the system of separated financial operations has been disintegrated because of several reasons; conglomerated operations are beneficial to reduce and scatter risks, to provide comprehensive financial services for clients, and to achieve scale and scope of economy; the styles of international financial holding company, financial group and all-round banking can be taken as a reference; financial holding company needs fire protection wall to strengthen supervision; conglomerated operations need the environment of clearproperty right, good corporate governance, standardized laws, developed information technology and strict supervision; China can develop conglomerated operations step by step. This paper puts forward clearly the subject of developing conglomerated financial operations in our country and summarizes the general rules and operating skills of the actual innovation of conglomerated products and operations in China. The paper is meaningful and of reference value on promoting conglomerated operating mode as well as enhancing the competitive edge for domestic financial institutions.