The Supervision Of Financial Holding Company In China

Since the 1980s, the increasingly fierce competition in the marketing, financial innovation and integration and the release of supervision has been the global tide. As the core part of national economic development, finance made constantly innovation in financial strategy, financial business and financial instruments. The organizational form of financial institutions have also emerged from the traditional single institution to develop in the direction of the Group, a single financial services from the provision of comprehensive financial services to develop in the direction of the operation from the mixed business development trend. Because of the advantages of financial holding companies (FHC in brief), developed countries like the US, Japan, the UK modified their laws and financial systems gradually. FHC became legitimate. Along with that, financial business and supervision system in the world changed a lot.Today, the mixed operating system has become the unanimous financial choice of the United States, Britain, Japan and other major developed countries. Collectivized operation possesses scope economy and scale economy, meanwhile; systemic risk can spread among subsidiary companies which would endanger financial system greatly than a single financial institution. Therefore, the healthy development of FHC must be based on scientific supervision system and under restraining measures.Our financial system, established the divided business operating system in 1998, has just gone through several years of development, which is weak. After joining the WTO, there is only five years of financial industry protection period left for the Chinese financial institutions to face the threat of foreign financial giant. Under the pressure of self-development and competition from foreign financial institutions, China starts to study its way to develop FHC. According to incomplete statistics, there are at least 200-300 FHC in China neither directly registered nor named. In order to protect the healthy development of FHC, we should study the financial regulatory system of FHC suitable for our country and the supervision method learned from foreign countries. This is exactly the meaning why this paper chooses to study the supervision of financial holding company in developed country as research object.This dissertation consists of four chapters, the main content are as follows:Chapter one introduces the relevant concepts and the background of FHC, with their main types and the advantages. Section one focuses on the background which gave birth to FHC. Since the 1980s, the pattern of world financial market has changed significantly. With the fierce market competition, financial innovation and financial integration, scientific and technological progress, financial system innovation and the relaxed control policy, the developed countries search for a new profit growth point in the financial field. However, the FHC are different due to the differences between every country in economic and political system. Moreover, the legal definitions of FHC are different, either. In section two, the definitions of FHC which are put forward by different countries and regions are introduced on the basis of holding analysis. And the characteristics of FHC are also been discussed. Section three analyzes the micro and macro advantages of FHC. In micro, FHC mainly reflects seven aspects of advantages: economy scope, economy scale, synergies, capital portfolio, intensive operations, capital expansion, and reasonable tax avoidance, and the emergence of FHC adapts to the developing rule of China's financial market in macro. At the same time, it can also be the mainstay which is indispensable and can compete with foreign financial transnational companies after the accession to WTO.Chapter two analyzes the special risks and the necessity of supervision for FHC. The FHC has greater risk than normal financial enterprises. Therefore, section one discussed risk transfer of FHC, double counting of capital, opaque risks, monopoly risks and other macro risks. Section two discusses the necessity for supervision. Financial supervision is an important form of economic supervision. It aims to protect its financial system operational safety and efficiency, vindicate open, fair and orderly competition in financial markets legally, prevent systemic financial risks, and protect depositors, investors and insurance. As financial system arrangements to correct the market failure provided by the government, financial supervision is intended to maximize the financial system to improve the efficiency and stability. The large scale and the internal complex relationship between the subsidiaries decide the decisive position in the financial market. The supervision for this type of companies has a direct impact on the stability of the entire market. The thesis discusses four areas: financial vulnerability, the asymmetric information, the negative externalities and the necessity for supervision arising from globalization.Chapter three analyzes the mode of FHC in developed country. Basic mode of FHC supervision in developed country is introduced in section one. By now, the financial supervision system available for FHC can roughly be divided into the following three kinds: supervision mode in unison, supervision mode in segregation, incomplete unified supervision mode. Each of these modes has pros and cons. Development level, supervision habit and the supervision power of financial circles will lead different country to adopt different supervision mode. Section two, as the example with three typical countries of U.S.A., Britain and Japan, the paper analyzes the supervision practice of FHC of developed country. Through analyzing the development history of FHC, we can find that although different country has different course of financial development which leads to the different characters of FHC, the process of ending separate operating and setting FHC is consistent with every country's political and economic development track.Chapter four is the analysis of development situation, specific risk and selection of supervision mode to FHC of our country. Section one explains the development situation and status in quo of financial supervision of our country, pointing out that there are problems in supervision to FHC under the divided business operating system. In section two, it explores the regulatory system and supervision measure to FHC of our country. This paper propose our country can adopt the supervision mode of FHC as follow: establish the leading financial regulatory system that taking CBRC as coordinate person, coordinate the work of CBRC, CSRC,CIRC and make it institutionalized, make joint conference of financial supervision legislative according to law, realize the transition from umbrella supervision to unified supervision modes under the"Two steps"policy. In section three, we originally propose that the supervision of our country's financial holding group should adopt the inside control priority mode which not only perfect the internal supervisory system but also strengthening the internal management responsibility. On the other hand, the action of increasing intra-group liability which is learned from"Sarbanes-Oxley Act"of the United States can solve the Asymmetric information problem. In section four, we propose some suggestions of perfecting the external supervisory system of FHC in our country concluding: the supervision targets identification, establishment of effective inside controlling system, improvement of the financial supervision modes, perfecting financial industry self-discipline organizations, market access and exit standards, external negative effect prevention, and the supervision of characterized risk of the group.