Legal Study On Financial Innovation Regulation From The Perspective Of Lessons Of Subprime Mortgage Crisis

The outbreak of the U.S. subprime mortgage crisis originated in the excessive financial innovation, from the institutional point of view it is because low levels of financial regulation performing with overlapping and vacuum. So the lessons of the subprime crisis and improvement supervision of financial innovation should be mainly from the following aspects:Improve the pre-crisis separate supervision system and strengthen supervision of financial derivatives, and international cooperation in financial supervision.Sub-prime crisis in the financial innovation from the micro perspective, is the MBS, CDO, CDS and other structured products, asset securitization and financial derivatives, but the sales of these products has been changed deeply the U.S. financial system from the macro angle, mainly in the following areas:transform the indirect financing to direct financing; "shadow banking" system leading financial sector of the United States; industry has been closely mixed together in the U.S. financial sector into the advanced stages, triggering more easily a liquidity crisis.U.S. subprime crisis has exposed the major problems of financial regulation is overlapping and vacuum. Believing in market forces and market mechanisms, no interfere with financial innovation with long-term, is the formation of the ideological roots of the crisis. Sub-sector regulatory regime formed in the 30's of last century under the concept of separation, even after several mend, still can not adapt to the reality of already highly mixed operation and control of mixed industry.In the regulatory regime, we should further improve the existing system of separate supervision, bring investment banks, hedge funds and private equity lacking originaly of supervision into the supervision system, set up the financial institutions to resolve the existing inter-institutional coordination body, strengthen regulation on systemically important financial institutions, establish rescue mechanisms and handling mechanism of endangered financial institutions in response to the "too big to fail" phenomenon, and build the new mechanism to control mixed risk and prevent systemic risk.In the regulation of financial derivatives, the establishment of mandatory disclosure of financial derivatives trading ensure fairness and protect the interests of ordinary investors, we improve regulatory of the mortgage lending, credit rating agencies and process of asset securitization, strengthen information disclosure and business regulation of the "out-sheet business", control risk and trading leverage preventing from excessive accumulation and infinite magnification, introduce gradually the system to OTC derivatives trading market for changing the field's lack of supervision conditions, such as the central counterparty clearing system, the margin system, information disclosure system, large trading reporting system.In international cooperation level of financial supervision, we should innovate Basel II capital adequacy ratio, establish t national information sharing system among regulatory authorities, implement consolidated supervision, it is necessary build international cooperation in the global financial regulation basing on the new Financial Stability Committee.Comparing with the U.S. subprime mortgage crisis, China's financial innovation has a huge gap in terms of stage of development and business size, but these can not affect the huge significance of the sub-prime crisis to carry out financial business model reform and control mixed industry and innovation risk of China. From the regulatory system perspective, the short term is to legislate building the Financial Supervision Commission learning from U.S. practice of financial regulatory reform bill, the long-term goal should be to create a single regulatory regime. We should control risk of mixed industry and innovation and issue "Financial Holding Company Law" as soon as possible, strengthen regulation of systemically important financial institutions drawing lessons from the U.S. practice of financial regulatory reform bill, conduct "firewall" system for isolation risk of mixed industry. For the development of financial derivatives, we need to develop financial derivatives with adhering to the faith, following the current world-wide OTC derivatives trading reform trend, improve the trading system and regulatory system of OTC financial derivatives. Our country need a more positive and proactive attitude to participate in international rule-making and implementation activities in International cooperation in financial supervision.