Legal Aspects Of Comprehensive Financial Operation

As one of the objectives of the reform and development of the financial sector, toperfect the fundamental systems for the normative operation of financial institutions,and to promote the experimental development of comprehensive operation of thefinancial industry, is stipulated in the Outline of the 11th Five-Year Plan for theNational Economic and Social Development of the People's Republic of China. Thisstipulation forms the legal basis for financial institutions to practice comprehensiveoperating experimentally. In fact, financial business segregation and specializedsupervision is still the present principle of financial legislation in China.The stipulation and policy to experiment comprehensive financial operation inChina is nearly the same as the financial deregulation in the West before their puttingan end to the segregation of financial businesses between banks, securities companiesand insurance institutions by new laws. However, the situation in China is quitedifferent from that of the West. Firstly, China is still a developing country. It had beenexercising highly centralized planned economy for a long period of time, and it is notlong for it to carry out the socialist market economy with Chinese characteristics.Secondly, the market direction reform and development of the financial industry hasjust started, the financial law and supervisory system in China is only in its frame. Itcosts us time to complete them. Thirdly, China has honored its WTO accessioncommitments and further opened up its financial market. Domestic financialinstitutions in China cannot but face the challenges from international financialinstitutions. We believe that experimental development of comprehensive operation ofthe financial sector in China will help to accumulate its experience and find out thesuitable patterns, legal and supervisory systems of the financial comprehensiveoperation in China. The passage of the Financial Services Modernization Act (Gramm-Leach-BlileyAct, GLBA) in the United States in November 1999 repealed the Glass-Steagall Actof 1933. The new Act permits subsidiaries of financial holding companies to affiliatewith securities companies and insurance institutions and vice verse, thus putting anend to the segregation of the financial businesses between banks, securities companiesand insurance institutions and marking a new era for universal banking, or theso-called financial comprehensive operation. The GLBA not only introduces a historicchange into the US financial sector, but is also a milestone in the financialdevelopment of the world. From then on, special care has been given by the domesticacademia to the historic change, and a lot of research about the mixed financialoperation has been carried out. But, the research achievements focus mainly on theeconomic aspects of financial comprehensive operating, and little is about its legalaspects. This doctoral dissertation is intended to fill this blank.In fact, under the present backwardness of the national economy and finance, it isstill not the right time for the domestic financial industry in China to transformentirely into comprehensive operating system. In order to do so, some basicenvironment and financial ecology suitable to financial comprehensive operatingshould be established beforehand, and the establishment of complete legal frameworkand supervisory system is one of the most important aspects. To fulfill the purpose, itis necessary for us to carry out a series of comparative studies on the basic financialenvironment and ecology in western developed countries, as well as the legal aspectsof the financial comprehensive operation and its supervision.The characteristics and contributions of this dissertation are as follows: (1) theresearch about the laws and practices of the world's financial comprehensiveoperation lie in the following 5 aspects: the integration of the service businesses offinancial institutions, liberalization of trade in financial services under the WTO,organizational conglomeration of financial institutions, globalization and assimilationof financial laws, internationalization of financial supervision. (2) the methodologiesof the dissertation are of a rich diversity, including approach of economic analysis,historical analysis methodology, qualitative analysis methodology, and methodologyof comparative law, and so on. (3) the dissertation considers China's realities, i.e.,China's specific circumstances are discussed in detail and relevant policy suggestionsare put forward to be of use for the reform of the financial sector and its supervisionsystem.The dissertation consists of an introduction and 6 chapters, with about 300,000words in Chinese. It can be divided into four parts, although the author does not do so.Firstly, Chapterâ… can be the first part, which studies the basic concepts and theories ofthe financial and legal systems of different countries under the conditions of thefinancial globalization, and forms the theoretical basis of the whole research project.Secondly, the core part of the dissertation consist of 4 chapters, i.e. Chaptersâ…¡-â…¤,which analyze the integration of the businesses of financial institutions, the liberalization of trade in financial services under the WTO, the organizational groupof financial institutions, and the globalization and assimilation of financial lawsrespectively. Thirdly, the dissertation has the entire chapter to discuss the legal aspectsof the internationalization of the financial supervision in Chapterâ…¥. Finally, Chapterâ…¦specializes in the financial system and legislation in China, especially the legalaspects of financial holding companies and their supervision, putting forward somelegislative suggestions on China's financial business segregation and its supervision.The main contents of the dissertation are as follows:Introduction: It introduces the dissertation, and focuses mainly on theexplanation of the title of the dissertation, the significance of the research project.Also in this part, the framework of the dissertation is outlined, the characteristics,innovations and contributions of the study is summarized, and the methodologiesadopted in the research is introduced.Chapterâ… : Financial globalization and the adaptation and adjustment of thefinancial system and laws in different countries. It academically defines such termsabout financial operation as business segregation and universal banking, or financialspecialized operation and comprehensive financial services, and analyzes the pros andcons of both financial specialized operation and comprehensive services. Specialemphasis is laid on the financial operating system and financial law under thecircumstances of financial globalization.Chapterâ…¡: Financial services integration and the present situation and tendencyof the financial operation systems in different countries. It discusses and compares thefinancial systems and financial laws of the US, UK, German and Japan. Analyzing thereasons of universal banking systems, it gives specialized research on the financialliberalization, financial globalization, the intense competition in financial markets,financial innovation, financial disintermediation, financial information technology,and the modernization and normalization of financial supervision. In the third section,it studies the tendency of the comprehensive financial services and the relationshipbetween the different financial industries.Chapterâ…¢: Organizational conglomeration of financial institutions and thechoice of organizational patterns of financial institutions to carry out comprehensiveservices businesses. It discusses the fundamentals of the legal organizations offinancial institutions, the development and characteristics of the financialconglomerates, and places special emphasis upon the legal aspects of financialholding companies and their supervision. It analyzes in details and comparesgenerally the financial conglomerate legislations of the US, EU and its members,Japan, and Chinese Taiwan.Chapterâ…£: Globalization and assimilation of financial laws and theinternational comparison between laws for comprehensive financial services ofdifferent countries. It is in this chapter that the author defines integration of financiallaw, analyzes the relationship between financial globalization and integration of financial laws, and compares in details the financial legal systems of differentdeveloped countries and international financial organizations. In fact, it discusses thefinancial legal systems of the US, UK, Germany, Japan, and deals with theinternational monetary law under Bretton woods system, the law for trade in financialservices under WTO, and the international banking supervisory rules under BasleFramework.Chapterâ…¤: Internationalization of financial supervision and the internationalcoordination and cooperation in it. Firstly, it defines such terms as internationalizationof financial supervision, financial comprehensive operation and the internationalaspects of its supervision. Secondly, it studies the experiences and characteristics ofthe internationalization of financial supervision from some key international financialorganizations. Thirdly, it discusses the legal aspects of the supervision of financialholding companies (FHCs), comparing different supervision systems for FHCs. Alongwith the trend for comprehensive financial operation, the financial supervisionsystems all over the world changes correspondingly, and there emerge the followingsupervision patterns as the mega-supervisor, the leading-supervisor, the parallelsupervisors, the two-peak supervisors and the umbrella supervision plus functionalsupervision in the US.Chapterâ…¥: Legal aspects of financial holding companies and their supervisionin China, with some legislative suggestions on China's financial business segregationand its supervision. To tell the truth, one of the ultimate objectives of this dissertationis to do specific study on China's financial services industry and its supervision. Onone hand, it recalls the evolution of China's financial system since the end of 1970s,analyzes the historic backgrounds, main causes and effects of the segregation infinancial services business, points out that China should promote the experiment oncomprehensive financial operation through the pattern of FHCs. On the other hand, itgives some policy suggestions on the legislation and supervision of the FHCs underuniversal banking system or comprehensive financial operation system.Moreover, the author wants to express his sincere appreciation to Prof. ZhouHongjun and other team members of the doctoral advisors of the international lawcollege from East China University of Politics and Law.