Research On Supervision Mechanism Of Bank Foreign Exchange Business

At present, due to the weak risk prevention capacity of the main market players in China, the incomplete financial supervision system and the to-be-improved degree of marketization, it is beneficial to maintain the independence and effectiveness of the macro-control, to resist the shock of massive cross-border capital flow, and to create the stable environment for the smooth and rapid economic development to maintain an moderate foreign exchange control.With the evolution of the American financial crisis, the cross-border capital flow under the new circumstance has become more complicated and the task to supervise the bank foreign exchange business is more and more important, which is not only a need to prevent risks and maintain the balance of international payment, but also a key guarantee for the integration with the mature international foreign exchange market.On the basis of the general background of the foreign exchange system reformation, with a focus on the fundamental issue of bank foreign exchange business supervision in the foreign exchange control sector, this paper makes a comparatively complete summary and overview of the objectives, approaches and standards of bank foreign exchange business supervision, and presents an in-depth analysis on the existing problems with bank foreign exchange business supervision as well as their causes in terms of the status quo of the supervision, the legal system, the costs and returns. The paper is based on the daily supervision and special inspection conducted by those 28 banks in Dalian with foreign exchange business via combining the theories and the practices and using the modern economics and principles of management.At present, the authenticity review of the current items is usually handled by the bank directly. The Foreign Exchange Administration is only involved in the authenticity review of those items beyond the guiding quota or without any definite regulations as well as a small number of items where the material and capital flow can not match directly. More and more review on the settlement and sales of standard capital items are handled by the banks now. As proven by the practice, the new administration philosophy helps the foreign exchange departments to put together their resources and improve the regulation efficiency. However, the lag in the supervision measures, the policies and the capacities has affected the further deepening of the indirect administration philosophy.In the paper, the advantages and disadvantages of the current supervision mechanism are analyzed and the gains and losses of the foreign exchange supervision are summarized on the basis of bank's foreign exchange supervision practices to explore the effective foreign exchange business supervision mechanism suitable for banks in China. The concept for further deepening indirect supervision is proposed by this paper so as to base on the integration of the foreign exchange control information system available, to strengthen the monitoring, early warning and analysis of the cross-border capital flow and to implement targeted site inspection to the banks. Also, it is proposed to establish the practicable and feasible examination system based on the on-site and off-site inspections and to conduct classified supervision on banks.