The Study Of Financial Regulation In The Context Of Financial Crisis

Financial regulation refers to the supervision and management of the financial sector by the financial regulatory authority of a country (or a region) according to the national laws and regulations. Finance is the core of modern economy, because of the negative effects of the financial system, financial has become an important part of economic monitoring. The negative effects of the financial system are the inherent instabilities which also refer to the inherent fragility of financial institutions and financial markets and the inherent volatilities of asset prices. When the collapse of financial institutions'operating conditions turn into a financial crisis, these negative effects then transmit to all aspects of the economy, and lead to overall economic downturn. With the boundaries between financial businesses are broken constantly, the distinctions between different financial institutions as well as instruments are blurred increasingly. The deepening of financial internationalization and the expansion of international capital flows make financial crises break out more frequently, thus the impact of these crises become more far-reaching.The financial crisis happened from 2007 to 2009 originated in the sub-prime debt crisis (or sub prime mortgage crisis) of the U.S. The crisis caused a serious impact to the global financial and economic situation. From the Icelandic implosion to the European debt crisis which is triggered by the Greek sovereign debt crisis, they are all related to the financial crisis. However, the financial crisis also triggered the studies on the warning mechanism and the handling mechanism of the financial institutions despite it shocked the financial systems. The economic entities will face the reconstruction and reform of the financial regulatory system.There are five parts in this paper:(1)part one briefly introduced the study background, situation and the innovations as well as the shortcomings of this paper, (2)part two elaborated the manifestations and causes of this financial crisis,included the over-derivative financial products, the mistakes of the credit-rating companies and the vacancies of the financial regulatory authorities, (3)part three summarized the important financial regulatory reform of the some countries like the United State, the England and the European Union and the inspirations to our country's financial regulation, (4)part four analyses the imperfections of our country's financial regulation combine with the vacancies of financial regulation in this crisis, (5) part five gave some suggestions to improve our country's financial regulation with using the international financial regulatory experiences for reference.The main points are:Financial regulation should has four functions as follows:(1) ensuring financial stability and risk prevention, (2) protecting the interests of financial consumers, (3) improving the efficiency of the financial system and (4) normalizing the conduct of financial institutions and promoting fair competition. Financial crises will destroy the financial system stability and bring great loss of consumers'interests, thus spark off deep discussion of the financial supervision and then promote the regulatory authorities to reconstruct their regulatory frameworks, which includes the aims, the objectives and the techniques of financial regulation.This paper analyses the defects of financial regulation in this crisis on the basis of the study on its manifestations and causes. Because the mixed-business management of financial businesses has become an irreversible trend, China's decentralized regulatory model has exposed the imperfection of the coordination mechanism which also makes the regulation of financial holding companies and credit rating companies imperfect. Although the restrictions on the financial innovations what reduce the potential risks caused by the complexity of financial activities to some extent, they are also adverse for the transmission of risks because of the lack of financial instruments. For improving our country's financial regulation, we should:(1)lay down a complete macroscopic prudential financial regulatory framework,(2)improve the coordinate mechanism of the financial regulation on the basis of maintaining the separate supervision mode and highlight the importance of the functional regulation,(3)perfect the legal framework of financial supervision, (4)have a good grasp of financial innovation and financial regulation. Furthermore, we should also make effort to create a favorable international environment for improving our country's financial system.