Study On Supervisory System Of The Combination Of Industry And Finance

The thesis starts form the challenges to financial regulatory brought by the changes in the financial business model. Respond to this challenge, it should be settled in two ways. For one thing, in order to require localization experience we should analyze the characteristics and risks of the new financialmodels, for the other we should study and analyze foreign practices and legislations so as to get foreign experience. On the base of the said factors, the appropriate system may be designed to meet the challenges.The first chapter is entitled "Challenges of Financial Supervision: from Mixed Operation to the Combination of Industry and Finance (hereinafter referred to as"CFI")." The chapter first reviews the reasons for the existence of financial regulation and pursuit of value. Therefore, It is convinced that the financial supervision should match financial practices. Currently, the changes in the financial models of countries in the world, including China, have not limit mixed operation among banking, securities, trust and insurance, has already extended to cross-industry fields which phenomenon is named as "the Combination of Industry and Finance". Before clarify the conception, I first defined the meaning of financial capital that is the highest stage of evolution of capital's history, and is to invest in various financial assets, and pursue the maximizing value. On the one hand, the financial capital has a close relationship with industry capital in virtue of industrial capital relying on financial capital; the other hand, the financial capital is independent from the industrial capital in pursuit of the objective of maximizing the interests of the investment function. On this basis, I believe that on the broad or substantive point of view, the combination of industry and finance is the phenomenon of mutual penetration between financial capital and industry capital.Form a narrow point of view, the Combination of industry and finance means that by the way of equity participation and personnel, finance integrates industry. The types of the CFI can be divided into various ways. According to the drivers and the environment of systems, it can be divided into market-oriented one and bank-oriented one. According to the dominant parties and the direction of penetration, it can be divided into one starting form the finance to industry and the other starting form industry to finance. According to the relevance of business, it can be divided into correlation mode, weak correlation mode and no correlation mode. In order to clarify the concept of the Combination, the author has compared the relationship between CFI and mixed operation. On the basis of comparison, it is sure that mixed operation consists of narrow and broad meanings, and the broad one has already includes the conception of CFI. The rise of CFI brings challenges and risks to the finance regulatory system, for example, double counting of capital, high leverage point of holding company, related party transactions between the entities, relatively complex business activities and management structure, monopoly risks, the failure of information disclosure. In response to these new risks, it is necessary to reflect on traditional financial supervision system.The second chapter is entitled "South Korean legal system of the Combination." CFI has gotten great popularity in South Korea because of its special path of economic development. Correspondingly, the laws and regulations related to CIF are relatively comprehensive. And with ever-changes in domestic and international economic environment, it has formed a unique legal system.In this chapter, the author firstly outlines the Korean financial regulatory system and the overall framework, then introduce "assets of financial institutions and financial structure to improve the use of the law" in details make a comment on the related controversies and arguments, review recent reforms and policies. Finally, the author introduce financial holding company of SouthKorean. after trace the rise and fall of CIF, I believe that the phenomenon reflects the needs and interests of economic development. However in consideration of the different characteristics of the two industries, once the failure happened, it might spread in the overall financial and industrial economy. Therefore, some effective measure should be taken.The third chapter is entitled "other countries and regions of the Combination of regulatory system." In this chapter, the author introduced and analyzedCFI regulatory system of the United States, Britain, Japan, Germany, France, Australia, Canada, the East Asian emerging markets, China Taiwan region one by one. By comparative study, the author believes that whenChina learn related experience from abroad. For example, as to the financial regulation theory, it can learn foreign functional regulation theory. As to the method of supervisory and monitoring , it can draw lessons from the "firewall" theory . I believe that before study on the regulatory system of a country, it is necessary to understand the tradition and practices of financial operation in the country. Different company governance practices and market transactions tradition lead to different patterns of supervisory. Chapter IV is entitled "Evolution of China's financial model path analysis." The chapter introduces two kinds of evolution related to China's financial operation pattern: one is transformation from the separate operation to the Mixed;Second, the other is rise of CFI. I stated the history of the former evolution in two angles of view. At the system level, the business model of theChinese commercial banks has experienced three phases, which started from mixed operation, then separate operation, and finally co-existing of separate and mixed operation. Securities and fund industry, especially in private equity, participated in commercial banks and insurance companies through a variety of ways. Meanwhile, the insurance system also slowly opened the door to mixed operation. At the practical level, China's financial industry mainly contains the following modes: first, low-level business cooperation. for instance commercial banks and securities, funds, insurance or trust co-operate to develop integrated products and sales agents; second, establishing Holding Company that the Group does not operate business by itself, but engaged in finance by controlling the equities of banks, trusts companies , securities companies, insurance companies and other entities; third, joint venture operating different industries; fourth, mixed operation through the acquisition of foreign institutions; fifth, setting up asset management company for carrying out mixed operation. As to the second evolution, the rise of Mixed mode, from 1990's, CIF spread in overall China. Large-scale industrial capital invested the financial industry. In 2001, the Haier Group acquiring financial institutions represented the starting point of the trend, which then was adjusted after the bankruptcy of DLong. The companies involved in the financial industry in variety of ways, including initiating the establishment, holding equity, joint-stock, mergers and acquisitions and joint ventures, and so on. the objection of CIF is to achieve bigger and stronger. Chapter V is entitled: "Evolution of China's financial models of risk analysis." taking example of DLong mode, the author analyzed the risk of CFI.The core of Delong model is that the commerce and industry companies acquired or controlled the financial institutions in order to finance. But of funding chain and cash flow of the business model is so tight that overall group featured high risk and internal instability which could speed up with the rapid growth. Once the banks tightened credit, DLong's cash flow sudden collapsed.From the shallow analysis, The failure of DLong resulted from lack of information disclosure regulatory system, poor corporate governance system, regulatory system of M&A, protection system on minority shareholders and creditors , on the regulatory system of regulators . From the deep analysis, the collapse of DLong rooted in the the development model of CIF and the imbalance of business strategy. The CIF mode itself involves great risks. Meanwhile, there was many difference between Financial and industrial capital, such as liquidity. the over-level proportion of industrial capital easily brought risks to overall entities in the group established in the mode of CIF because of its poor liquidity.In fact, the various financial risks coexist and interact in China's financial system,. To avoid the isolation of risks of CFI, the author also analyzed the risks of mixed operation and financial holding companies. Mixed operation mainly exists the economic risks and legal risks. Financial holding company exists the problem of insider trading, conflict of interest risk, risk transfer problems, the negative synergy and moral hazard problems.Chapter VI is entitled "regulatory coordination under China's financial new model." Post- subprime crisis, we need to rethink financial regulatory. On the one hand, financial regulators need to keep up with the pace of financial innovation; On the other hand, we need to re-define the object of financial regulation. In the environment of CIF, once narrow objects under supervisory can not meets the requirements of reducing systemic risk. To improve the financial supervision, we should bring related institutions which once were ignored into the vision of regulatory. On this basis, in order to improve China's financial regulatory, the following measures should be taken: First, establishing and improving the supervision system of similar financial holding companies. In order to prove the road for financial holding companies to an order and sound further, relevant laws and regulation should be amended or legislated. Second, building up financial firewall system. It is wise to restrict internal transactions between group members and control risks in the financial branch of industry through the institutional arrangements of "firewall", which could effectively resolve risks caused by the financial conglomerate. Third, introducing financial holding company system. The author suggested that in future, legislations related to China's financial holding company should pay special attention to legislative mode, model selection and establishment of the financial holding company , insider trading rules and other issues.