Research On The Market Restraint In Trust Supervision

The history of China trust industry is full of twists and difficulties. During the past thirty years, China trust industry has been restructured for 5 times. With the promulgation of the Trust Law and the regulations of the trust companies, Chinese trust companies gradually come back to track. Unfortunately,due to the ambiguous positioning and unclear understanding for the trust business, trust business are not properly operated and developed as thought and some trust companies are exposed to the risks. In March 2007,Chinese regulatory authorities revised the trust companies regulations and formally orientated the trust industry in Chinese financial system. Thereafter, the trust sector has enjoyed vigorous development and has gradually become an important component of China's financial system. How to build effective regulatory mechanism in China, improve the efficiency of supervision and avoid a repetition of violations, and promoting China Trust Industry healthy and rapid development is the main purpose of this dissertation.Trust institutions have significantly different risk characteristics and regulatory requirements from banks and other financial institutions, and capital adequacy ratio does not effectively apply for trust institutions. Therefore, supervisory review and market discipline would be the two most important measures to supervise trust business. The dissertation reviews the latest development of financial regulation theories and the New Basel Capital Accord, puts forward the perspectives of Market discipline system based on the characteristics of trust business. The market discipline means the shareholders beneficiaries and other relative parties restrict the behavior of trustee by market instruments. Specifically, market discipline and effective trust regulatory mechanism should at least include:Firstly, information asymmetry in trust business will cause the"adverse selection"and"moral hazard"for the trustee, which will threaten the interests of beneficiary. Compulsory information disclosure should be executed to improve the transparency of trust business and protect the interests of beneficiary.Secondly, system of Trust property publicity is popular in continental legal system in order to keep trust property independency and keep away from the abuse of trustee power. The dissertation provides one basic framework of Chinese trust publicity system based on Chinese property publicity system. Third, considering that trust institutions should strive for the shareholder's interests, maximizing the shareholders'interest, meanwhile assuming due diligence responsibilities to manage the trust property for the beneficiary in order to achieve the maximization of the interests of the beneficiaries of the trust property, the maximization of the beneficiaries'interests should be taken as the basic principle and starting point of the of trust governance, improving its governance framework, thereby bring the beneficiaries, shareholders of the Trust into play in the market constraints.