U.s. Financial Holding Company "increased Responsibility" And The Enlightenment

The doctrine of so-called"enhanced"or"expanding"obligation of financial holding companies emerged in the U.S. in the late of 1980s. Although it takes a variety of forms, far and away the most important category consists of legal requirements that holding companies guarantee (in whole or in part) the solvency of their regulated subsidiaries. As a result of these regulatorily imposed guarantees, financial holding companies are increasingly called upon to recapitalize insolvent subsidiaries or to compensate government authorities for losses that failed subsidiaries impose on public claimants (such as depositors) or public insurance funds. Although it is deemed as a departure from the traditional principle of limited liability, the doctrine of"expanding obligations"of financial holding companies is recognized as a effective regulatory instrument and was finally adopted by the Congress of the U.S.In China, financial holdings have begun to emerge since late 1990s and are still enjoy the freedom from regulation both institutionally and statutorily. Some scholars and experts from the practical community suggested that China should find solutions to the problems of financial holding companies, and as the author believes and concluded in this thesis paper, the"expanding obligations"is one of the valuable references in the regulatorily endeavor of China.At the beginning of the paper, the author firstly gave a general review of the development of financial holdings, introduced different definitions, and analyzed their characteristics, advantages and risks. In this part, the author is actually trying to, as well as give the reader a general idea about what financial holding companies look like, answering the question that why the financial holding companies'liabilities shall be enhanced or expanded.The second part is about how the"expanding obligations"are imposed in the U.S. In this part, the author introduced the justifications, the practice and relevant measures and statutes. As the doctrine of"expanding obligations"is quite similar with another very important and famous doctrine of"piercing the corporate veil", the authorexplained the differenced of these two doctrine. At the end of this part, the author concluded that"expanding obligations"doctrine is an effective instrument to the moral hazard which is a result of the combination of the inherent risks in the financial system and risks caused by a limited liability of the financial holding company.In the third part, the author focused on the reality of Chinese financial holding companies and found out that due to the specific history of their development and the structure and status quo of the financial regulation in China, Chinese financial holding companies have their own peculiar natures. However, the"expanding obligations"doctrine is of same, if not more, value in China, although the doctrine needs some amendments to be adjusted to the situations of Chinese financial holdings.