Research On The Regulation Of Affiliated Transactions In Domestic Financial Holding Companies

As an innovation, financial holding company has been favored by increasing number of countries and regions, and China has been swept by the tide. But in recognizing the advantages of financial holding company, we should also be soberly aware that the financial holding companies also have many new uncertainties and risks. Many new problems and risks generate for complex relationship between funding in financial holding company, of which risks related to the transaction is the most important one. The article selected financial holding company affiliated transactions within a theme, and divided into four chapters of the main structure, the main elements are as follows:Part one: principles and analytical of financial holding companies affiliated transactions within the regulatory system.The cause of financial holding companies from the Group lies in the use of the internal structure of relations in order to achieve synergies and economies of scale, thereby reducing operating costs, enhancing the overall effect, but these are not achieving without affiliated transactions. Affiliated transactions as a general economic phenomenon has its roots in deep economic theory. Any attempt to put an end to all acts related transactions is unwise, and contrary to the laws of economic behavior. Affiliated transactions on the one hand bring groups economies of scale, synergy, which reflects efficiency value. But on the other hand, the existence of abuse advantage of the potential risks of harm associated interests; his potential risk is likely to violate security and fair value. Without this potential risks rules, long before the confidence of investors in the financial markets would be lost, but this practice is not in conformity with the law on social equity value. Purely financial efficiency at the expense of fair practice for the financial industry will eventually become inefficient and "air".Embodied in the rules of affiliated transactions, that is, it should be to maximize the efficiency and security of harmonization, no one-sided pursuit of fairness and justice, and no laissez-faire attitude.Part two: financial holding companies affiliated transactions within the regulatory system and analysis.Introduce the law and regulation of the major international organizations and typical national, and the related law in our country .In order to implement effective monitoring financial holding companies, in recent years a number of international organizations, regional and developed countries promote and carry out the legislative work. Some countries have developed or are in the process of formulating relevant laws and regulations, in some countries; the existing legislation has been amended to increase the financial holding company with the content. States and international organizations through horizontal comparison, we may discover that although the various countries and regions of the financial holding company affiliated transactions within the specified legal system regulations vary, but still reflects many common trends. Overall, these trends include the strengthening of internal financial holding company legislation related to the transaction system, establish appropriate financial holding companies the regulatory system, to the financial industry self-regulation, and emphasized the internal control of financial institutions.Part three: a typical case -- "the collapse of Delong"2004, "Delong groups" fall into the abyss beyond redemption, the ultimate demise, from the peak of brilliant overnight, and which caused a great sensation in the financial sector. The author analysis the reason and the need for china to develop a financial holding company , and further noted that the key caused to vanish lie in their complicated affiliated transactions , and internal governance confusion. Shrinking core model is the combination of industrial capital and financial capital ,using "pyramid" type multi-storey control chain, to achieve at least the funds to control the largest companies .Before vanish ,Delong has a large formation and sophisticated equity structure. Purchased in a fully leverage effect of capital, but also because of the expansion of the scale of the Group internal transactions related complex, resulting in excessive waste their capital and financial leverage is too high, leading to the collapse of empires. Have caused financial holding pattern created brilliant, but also to push it the destruction.Part four: The focus of this paper, to make suggestions and recommendations.The author's speculation on the establishment and improvement of rules regarding affiliated transactions among financial holding companies comes from the reflection on Delong case, borrows major international documents and relevant regulations from other countries and draws lessons from the practice of current rules of China on affiliated transactions. Hence, a regulatory system is suggested to be built on such a principle like"Legislation Improvement, Strengthened interior control and Reinforced supervision" First of all, it is necessary to improve legislation. At present, China's law on internal issues related to the transaction only has a few regulations, with the rapid development of China's financial holding company status extremely disproportionate. On the base of borrowing major international documents and relevant regulations from other countries , author give suggestion to make our related regulation system more perfect ,such as the main entry and exit mechanisms, the disclosure of information system, firewall recommendations and related interest groups and protection recommendations.Second, we must strengthen internal controls. Internal control of financial institutions is the foundation of modern financial regulation, only a good, strict internal control mechanism to monitor the external sector regulation to be effective. A sound internal mechanism by good internal environment should have a clear division of labor, improved forecasting and risk assessment system and open communication channels.Finally we must strengthen supervision. In Delong case, the supervision comes too slowly, and these can not but arouse the attention of the regulatory authorities. The financial industry is the most competitive one, the highest risk sexual areas at the same time; it is the national economy blood and nerve. Once more the risks and crises, to the entire country's economic development will cause enormous negative impact. On the base of learning from foreign experience and in light of China's actual conditions, author suggests to establish a system by a "government regulation on, and give full play to industry associations, the supervisory role of intermediary organizations".