On the open system under China's prudential supervision of foreign banks

Abstract accordance WTO commitments, China was in the end of 2006 fully open to foreign banks in the domestic financial market. However, as a developing country, China and the developed countries in the financial services market and the ability to resist risks there is a big gap. How high the context of the liberalization of foreign banks to prudential supervision, is worthy of further study.

Paper Keywords prudential supervision of financial liberalization, foreign banks

First, the Chinese regulation on foreign banks and the legal basis of practical necessity

(A) China's foreign bank regulatory legal basis for one. Territorial jurisdiction. 'Declaration of a new international economic order' and the 'Charter of Economic Rights and Duties' provides multinational companies engaged in business activities Acceptance countries have based their full sovereignty, either through their national laws, regulations and adopt various benefit their economies the development of measures to control and supervise the activities of transnational corporations.  Bi foreign banks is a special form of multinational companies, of course, to be the host government regulation, which also reflects the host country's economic sovereignty and territorial jurisdiction.

2. Implied consent of the foreign investor. Rational investors can not ignore the territorial jurisdiction of the host country, hastily into his country to carry out investment activities within, so to enter the territory of the host country investment in the act itself means that foreign investors in their investment costs and risks (including the host country may exercise of territorial jurisdiction and damages) with a clear trade-off, which can be regarded as foreign investors have impliedly agreed to the host government and its investment in its supervision and management.

(Two) Chinese regulation on foreign banks practical necessity, as some scholars have pointed out, although from a legal point of view is the host body, but foreign banks are essentially outsiders. This means that, despite the legal aspects of foreign banks in China may have in terms of legal qualifications, but after all, foreign banks, and its lack of ownership of the attitude to maintain the stability of China's financial market, a profit is the most important prerequisite for its business and power, even the only purpose. Therefore, China must strengthen supervision of foreign banks, or is likely to cause the domestic financial market turbulence.

In addition, China's economic development has also been adversely affected foreign banks. Main manifestations are: Chinese banks and foreign banks in the market competition in a weak position; country's macro-control as the entry of foreign banks has increased the degree of difficulty; healthy development of the national economy and structural adjustment of foreign banks have also been affected. In summary, in order to effectively prevent the negative impact of foreign banks to play an active role for China's financial industry to make a unique contribution, but also to protect the Chinese-funded financial institutions, protect the domestic economy stable and healthy development, strengthen the foreign banking supervision law is particularly important.

Second, China's foreign bank supervision on the inadequacies of the

All along, China's regulatory authorities are in constant efforts towards regulatory standards closer to international standards. To the 'Regulations of foreign banks' and 'foreign banking relationships Implementation Rules' as the core foreign bank regulatory legal system has been established, this system has been relatively well, but its own problems can not be ignored. Mainly in the following aspects:
(A) legislative chaos in a lower level as of the end of 2010, the total number of foreign banking institutions in China reached 360, total assets of 1.74 trillion yuan.  vertical still not a country has specific laws to adjust the foreign banks, the current adjustment is still relying on 'The People's Republic of China Foreign Banks Regulations' and 'Rules' and other supporting regulations, the CBRC and its agencies are most relevant supporting rulemaking body, these chaotic, does not have a systematic and legal effect is low. 'Commercial Bank Law' merely adjust our basic banking laws, foreign banks and therefore it does not make provision related issues. These normative legal documents there are many problems, if not specified bank secrecy provisions of law confusion, lack of stability, there is no uniform guiding principles.

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(two) of the financial regulatory tools to be developed to improve the daily supervision of the financial sector are dominated by non-site inspections, on-site inspection, supplemented. The on-site inspection and off-site inspections applicable in our country there exists the problem of insufficient continuity and effectiveness. From a regulatory point of view the contents of the Western developed countries control bank financial risk is the risk of using more scientific and systematic monitoring of the management approach. In China, although the business scope of foreign banks, capital adequacy ratio, liquidity ratio, asset-liability ratio, etc. in the 'Foreign Bank Management Regulations' are clearly defined, but afterwards regulatory compliance still dominant, preventive things in advance and check the weak, so that makes real business activities and can not perform the audit banking institutions and regulatory cooperation reflected in the accounting statements. That is, if a large number of foreign banks in the future use of financial derivatives, new financial instruments for speculative purposes, which triggered the financial risks, China's current regulatory approach and means are of no avail.

(Three) cross-border regulatory cooperation is not enough for emerging market economies studies have shown that foreign banks, foreign banks often because the home country banking crisis and a large contraction of its business, so that the host country's financial and economic affected. Therefore, to enhance the home country and foreign banks communication and cooperation is particularly necessary. However, the home countries of foreign banks and master's study in our country but in a blank state. By the end of 2006, China's WTO commitments in accordance with the full liberalization of foreign banks financial markets, then, from Turkey, India, Jordan, Norway, Egypt, Spain, South Africa, Brazil and other countries and regions unfamiliar foreign banks have moved into the Chinese market, China the situation of these countries do not know much, uncertain whether their domestic financial stability, soundness and regulatory mechanisms parent bank's capital adequacy. Although the 'Foreign Banks Regulations' and 'Regulations' provides that the initial establishment of foreign financial institutions must provide the country or region's financial system and in related financial regulatory laws and regulations, but in practice, these provisions are only applicable foreign banks apply when once it gets access to the Chinese market, qualifications, then there is no follow-up tracking of regulation. Therefore, such a provision does not make the problem to be solved, other countries or regions in the event of financial crisis, China is still likely to be adversely affected.

Third, improve the proposal

(A) amendments to improve the regulations, establish and improve relevant legal system has regulatory legalization will have regulatory effectiveness, so in order for the effective supervision of foreign banks, most countries have developed a complete legal system such as the 1978 United States promulgated the 'International Banking Act,' which is a U.S. federal law first unified supervision of foreign banks. In view of this, China's urgent need to develop a specific normative legal to adjust the activities of foreign banks, can be called 'foreign banking law.'
First, the 'Basel II' provides the host country and home country control principle of the rational division of labor, China's domestic and foreign banks should be combined with the common issues in order to 'Basel' in the relevant principles as a guide to foreign bank regulatory system and a sound internal control system for the content, as soon as possible, 'Foreign Banking Act' enacted. To make it more systematic and specific, more feasible, a series of supporting the management of regulatory rules and rules should also be followed by the introduction of penalties. Second, improve our existing 'PRC Foreign Banks Regulations' and 'Rules' series of laws and regulations, to make the content complete, operability strong on foreign bank supervision laws to abide by. Finally, the NPC and its Standing Committee have enacted laws on top of the legal hierarchy, then in banking supervision which have enacted laws explicitly represented by its absolute authority, emphasizing its all legal and non-legal normative central position in the file.

(Two) regulatory elements, ways and means to improve First, the regulatory content, to establish a new regulatory system, the new regulatory system to a risk-based supervision, combined with regulatory compliance and risk monitoring, and gradually realize the regulatory compliance monitoring to risk the transition. Secondly, on the regulatory approach to the use of new regulatory approach, while using on-site inspection and off-site inspections in two ways, and off-site inspections based, supplemented by on-site inspection. The risk of foreign banks should increase inspection efforts, and be able to spot checks found off-site supervision business potential risks. Again, the regulatory and technical means, two changes should be reflected, respectively, when the main means of administrative measures based changes to the legal and regulatory approaches based qualitative analysis to quantitative analysis of regulatory approaches based changes. After joining the WTO, to conform to the world trend, only the first transition, while the second is a change to the regulatory compliance risk monitoring changing needs.

(Three) and foreign banks as well as the home country parent bank regulators to strengthen information exchange and cooperation in home and host countries to achieve an important guarantee for regulatory cooperation is to establish mechanisms for information exchange. 'Basel Agreement' and the series of documents provides multinational bank's home country and the host country closely and clearly the consolidated supervision of the four principles, namely the principle of adequacy, consolidated supervision principle, the principle of home country regulation and the main principles of consolidated supervision. China's current lack of information and lack of co-existence of the situation, to solve this problem, you need to work from the following aspects: First, in accordance with the 'Basel' on the host and home countries rational allocation of regulatory responsibility, initiative to assume proper responsibility . Second, the legal provisions require foreign banks should establish and improve the information disclosure system, to promote the timely disclose information derivative risk, regulatory authorities should keep track of developments, through cooperation with national regulatory authorities to weaken or resist the international financial risk. Third, as soon as possible SOSA  half-grown beans assess the implementation of the country risk and the home country regulatory regime for systematic research on the possible risks as far as possible within the grasp of the control.

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