A Dissertation Of Fulfillment Of Commercial Bank’s Description Obligation To Its Financial Products

The financing market of commercial bank has gone through 12 years, since the first commercial bank’s financial product appeared in 2003. Due to the professional financing service, sound basic serving net and good credit guarantee of commercial bank, its financial products are well received by customers and therefore the financing market in this area has become the second large asset management market in China, behind the trust market. However, as such market mushrooms rapidly, disputes also arise in large numbers. That is because commercial bank does not fulfill due description obligation to its financial products. Vast of improper conducts of fail of description obligation filled, as well as lack of related legal protection, lead to investors’ loss and disputes. As financial products enter its professional and diversification steps, investor’s weak position in acquiring related information is increasing gradually, while bank absolutely dominates the rankings due to its role as a designer and seller of financial products. Therefore, commercial bank’s fully description to its financial products makes significant sense to maintain the stabilization of financing market and decrease disputes.The dissertation centers on the fulfillment of commercial bank’s description obligation to its financial products. Chapter 1 introduces the classification of commercial bank’s financial products and the necessity of commercial bank’s description obligation based on the current information asymmetry, as well as the definition, features and meaning of such obligation. Chapter 2 discusses the theoretical basis of the description obligation, from the point of theories of information asymmetry and risk in economics, as well as principle of good faith, equity and mutual assent of contract in legal theory. Chapter 3 focuses on shortage of current regulations in China and corresponding advises. In summary, shortage in current regulations contains: unenforceable of the general regulations, tending to formalized in practice due to the regulations of method of performance, as well as lack of rules to judge whether the obligation has been received “understandable” and legal responsibility of breach of such duty. Chapter 4 then further analyzes the detailed performance of description obligation. The first quarter in this chapter introduces rule of description obligation; following quarter analyzes the subject as well as object; the third quarter states the details of description and criteria of “Important Notice”; the fourth quarter in this chapter introduces modes of description, namely, initiative and questioned description; next quarter states the extent which description obligation leads to, namely, understandable and related criteria. The last chapter, Chapter 5 offers several proposals for perfecting the current legislation in China, which includes 4 aspects. Firstly, the contents of description obligation should be specific, which conclude legalizing the obligation and perfecting the rule of “important articles”. Secondly, methods of fulfilling the obligation should be specific. To reach this level, written regulations of description should be systematized, and recording system should be established as a supplementary system. Thirdly, the extent of the obligation should be judged substantively on the rule of combining subjective and objective analyses. Fourthly, to clearly legalize the ability of breach of the obligation, as well as the civil obligations which commercial bank should bears.