Legal Issue Research On Financial Innovation Regulation Of The CBRC

Financial innovation is an important way to develop the banking sector. Since thereform and opening up of China, the acceleration of the speed of the banking sector’sdevelopment, the improvement of the banking system and the innovation of thefinancial system, financial products and financial organizations have made greatcontributions to our country’s economic development. The ongoing financialinnovation promotes the financial development and improves the financial efficiency.But in the mean time, it continually strikes at the financial order and financial system,which makes the financial regulation indispensable.The Banking Regulatory Commission (“CBRC”) has been established in2003with the intention to provide better supervision for the development of our country’sbanking sector. From the very beginning of its establishment, CBRC’s legal status isinconsistent with its regulatory power. Compared to its initial legal status as aministerial-level independent non-profit institution directly controlled by the StateCouncil, both CBRC’s power resource and its means of supervision indicate its statusas an administrative organ. A series of problems emerge from CBRC’s strongadministrative background, including its backward supervision ideas and standard.And most importantly, CBRC’s deficiency of independence results in itsadministrative and passive way in supervising the financial innovation, which greatlyrestrains the initiative of financial innovation. The authority of CBRC includes the power of administrative legislation,administrative supervision and administrative punishment. CBRC supervises thefinancial innovation of the banking sector by an integrated use of these three powers.CBRC has a lot of discretion and assumes great responsibility in supervising thefinancial innovation due to its administrative power, which harms the development offinancial innovation and CBRC’s neutrality.In practice, there lacks the supervision and accountability mechanisms to theCBRC. Reasonable accountability mechanisms shall contain the institutionaccountability and the performance accountability. Namely, the person to proceed andthe standard of accountability. The adverse impact from improper supervision isincalculable, which makes the establishment of accountability mechanisms verydifficult.The financial supervision innovates along with the development of financialinnovation. Aiming at the backwardness of the current financial supervision system,CBRC has already started to change the ideas of its supervision, improved themethods of its supervision and indicated that the ultimate goal of supervision ispromotion and not suppression. CBRC adheres to principles that supervision shall bethe combination of efficiency and safety, normative and flexibility, short term andlong term. Because our country is the period of reform and acceleration ofdevelopment, financial innovation is a crucial part of the reform and the establishmentof a new system of financial innovation supervision is very important.