Regulations On Commercial Banking Business Innovation

In recent years, commercial banks have developed a variety of innovative business models. The scope of business of the banks has expanded and spread to different areas of the financial system. This paper studies the regulatory issues on commercial banking business innovation through case analysis, comparative analysis, and literature review. Through in-depth analyses of the industry’s latest practices and the existing regulatory legal framework, comparing the China market and foreign practices, I hope to offer some suggestions on these issues and improve the regulatory regime of the banks.Business innovation of commercial banks has brought commercial banks with new opportunities to improve efficiency and to increase income, but it has also increased the risk of the financial market, and has made regulation becoming more difficult. At present, we are facing different regulatory issues on commercial banking business innovation, such as having different regulatory bodies with few coordination, inconsistency and generally low status of the regulatory laws, inability to update the laws in timely manner, lack of regulatory professionals, lack of effective information sharing mechanism among regulators, etc.This paper provides in depth analyses on commercial banking business innovation products, such as Trade Refinancing, Avalization of Trade Bills, and Dual Currency Letter of Credits, to demonstrate current regulatory issues. This paper also introduces the regulatory framework of Hong Kong SAR with a hope to see what we can learn from the experience of Hong Kong SAR.Currently, there are missing blanks in the banking regulatory laws in China, in areas such as the regulations and accounting standards of off-balance sheet business, personal responsibilities of the senior management, and more. This paper would give recommendations to improve the regulations of commercial banking business innovation, such as rising the level of legal and administrative orders, revising the relevant legal provisions, integrating regulatory resources, improving the regulatory process and learning from the experience of foreign countries.Commercial banking business innovations inject vitality into commercial banks, but at the same time, introduce new risks and affect the stability of the entire financial system. Therefore, we must establish appropriate and effective regulations, improve enforcement, cooperate with regulators around the world, and provide guidance for the commercial banks, to ensure the commercial banking business innovation can develop in a healthy manner.