The Monitoring System Of The Financial Holding Company

Historically, there are four types of financial holding companies in the People's Republic of China. However, the issues with respect to the organization and structure of financial holding companies have not been widely discussed until the promulgation in 1999 of the Financial Services Modernization Act of 1999 of the United States. In this thesis, we believe that the predominant model for financial institutions to engage in cross-sector activities and affiliations shall be to form a pure-holding company, i.e., the type of financial holding company that principally engaged in holding, controlling and managing financial corporations or groups of financial corporations but which do not themselves conduct the business of financial corporations. In addition, a non-prescriptive, self-regulatory approach is probably the best regulatory mechanism to be adopted by supervising authorities. This paper thus discusses the corporate auditor system of financial holding companies using the methodologies of the sociology of law, the law and economics and the comparative jurisprudence.The first chapter examines the role and the various types of financial holding companies. We then discuss, from the perspective of economies of scale and economies of scope, the proper construction of the organizational and structural framework of a financial holding company and its subsidiaries to ensure that there is appropriate arrangement of the controlling-subsidiary relationship under the basic legal structure in respect of the size of business and the allocation of personnel in order to generate economic returns.The second chapter elaborates the financial holding companies and their subsidiaries, and seeks to provide possible solutions for challenges encountered. Based on the author's relevant experience in Taiwan, this paper proposes a feasible arrangement of the organization and supervisory system for the board of directors, the supervisory board (the board of corporate auditors) and the management level, the underlying framework of which is mainly based on the regulatory structure of the US financial holding companies.