A Legal System Research On The Supervision Of Trust-Bank Financing Cooperation Business

The purpose of this dissertation can be divided into three levels. The first level isaimed at deep and systematical research on financing cooperation business betweenbanks and trust companies, thus opening a new perspective for our research onfinancing supervision. The second level is aimed at suggesting that regulators find outthe root cause for systematic risk in China through a legal system research on thesupervision of trust-bank financing cooperation business easy to cause financingsystematic risk. We should not simply copy regulatory policies of western countries,especially after outbreak of American subprime crisis. Problems of the financingsystem in our country and those in western countries are not homogenous. Hence,practical and feasible supervision measures can be established in combination withthe practical situation of our financing institutions and business. If just follows others,we will get caught in embarrassment of restraining our financing development. Thelast level is aimed at deep reflection on the situation of our trust-bank financingcooperation margin business banned in China but widely practised. The root cause isthe gambling interactions around the interests among the regulators, which causesdifferent regulatory policies applying to the financing product with the same trustlegal relationship. Financing institutions use the system differences to achieveregulatory arbitrage. If financing business can not be legislated uniformly, it can notmake mends that regulators formulate regulatory measures, but don’t eliminatefundamental problems.The paper carries out a systematic study of a legal system research on thesupervision of trust-bank financing cooperation business from the following fouraspects: legal relation structure of trust-bank financing cooperation business, capitalsupervision of trust-bank financing cooperation business, supervision of systematicrisk of trust-bank financing cooperation business, and supervision of real estate trust,namely one of key investment areas of trust-bank financing cooperation business. Thepaper is divided into four chapters.In the first chapter generation and development of trust-bank financingcooperation business are introduced as the starting point. Trust-bank financingcooperation business has a profound historical and legal origin. It is clarified that thedevelopment trend of trust-bank financing cooperation business in the future shouldbe positioned to wealth management market and should pay attention to theintergenerational inheritance of wealth. Trust-bank financing cooperation businessshould be from quantitative alternation to qualitative alteration. While legal structureof trust-bank financing cooperation business is deeply investigated. In such trust-bankfinancing cooperation business as guaranteed income type and break-even floating type business, the relationship between the client and bank should be debtor-creditorrelationship, and the relationship between the bank and trust company should be trustlegal relationship, and there is no legal relationship between the client and trustcompany. In trust-bank financing cooperation non-break-even floating type business,the relationship among the client, bank and trust company should be trust legalrelationship. Where, the bank and trust company as the co-trustees should bearresponsibility with property management. The formation process of governmentregulation and principle of proportionality have identity, so the paper introducesprinciple of proportionality and takes it as the measuring scale of analyzingsupervision effect of trust-bank financing cooperation business, in order to improvethe regulatory measures.In the second chapter the capital supervision index of trust industry and that ofbanking industry are comparatively analyzed, then stating their three developmentstages, namely the same supervision, different supervision and convergent supervision.The net capital supervision index and supervision index of capital adequacy ratio ofbanking industry have convergence. Regulators ensure that trust companies havesolvency by its net capital supervision index, and then the capital supervision index oftrust-bank financing cooperation business is systematically analyzed. In order tocalculate risk factor, the stand-alone trust of trust-bank financing cooperation businessis regarded as the collective trust in the Notice About Printing Items of TrustCompany’s Net Capital Calculation Standard issued by CBRC (China BankingRegulatory Commission). The financing services in the trust-bank financingcooperation business is regarded as having high-risk factor, where load services,accepting credit and paper assets business have maximum risk factor up to10.5%.These show that regulators are determined to lead trust companies to change fromfinancing to investment and from passive management to initiative management.Finally, the actual effect of capital supervision of trust-bank financing cooperationbusiness is appraised by the principle of proportionality. It is suggested that regulatorsshould pay attention to the homogeneity of financing products, and establish uniformsupervision standard and reduce supervision arbitrage. The unified standards shouldbe used for identification loan business called composite business, in order not to givehope to avoid supervision for the financing business. The credit assets clean tradingconditions should be strengthen and the circumvention of clean transactions should beidentified. The supervision purposes of investors’ interest protection should beestablished.In the third chapter the connotation, features and function of Chinese styleshadow bank are analyzed. The shadow bank plays an important role in boomingfinancing markets, providing diverse financing services for the real economy andleading financing innovation. The shadow bank should be objectively recognized. Itshould not be biased and totally denied. Our financing markets are subjected to strictsupervision by regulators, because they are not so free and open as those of developedcountries and the credit system is not so advanced as America. If evaluating Chinesefinancing system by using American high lever ratio and high level financinginnovation products, there is no such kind of shadow bank in China. But by the view of the financing innovation, degree of being supervised and whether to be protectedby central bank’s loan, there is still shadow bank in China. Where, the trust-bankfinancing cooperation business is the typical represent. The trust-bank financingcooperation business is easy to initiate systematic risk, so it is necessary that healthysupervision of systematic risk is established in the supervision of trust-bank financingcooperation business. In combination with principle of proportionality, supervisionmeasures of Chinese systematic risk are appraised, and the paper points out that thefunctional supervision in the systematic risk supervision is still in the exploring stageand the coordination of supervision don’t play a substantial role. It is suggested thatregulators should carry out the concrete measures of the functional supervision tolevel and carry out the concrete action of the coordination of supervision to level, orthese are without any real meaning.In the final chapter the paper studies the real estate trust, which is the keyinvestment areas of trust-bank financing cooperation business and hold the majorityof business scale of trust company, and analyzes the generation of real estate trust&development condition of converse growth of economical life, which shows that thereare much policy risk and market risk in the operation of real estate trust. Thus, theREITS should be developed in the future. Because real estate industry has dualattributes, namely security character and commodity character. It accords with theconcept of finance development, namely inclusive finance and capital government forthe people, and thus it is advised that regulators should mainly execute guidance stylesupervision. Meanwhile, the paper analyzes the capital supervision index of the realestate trust possessing high-risk factor and dual systematic risk possessing the realeconomy and financing system. It is suggested that regulators should establish TrustBusiness Law to unify financing market, and strengthening the trust concept ofinvestors’ assumption of risk, and changing the operation mode of trust companiesrigid payment, and thus to ensure healthy and stable development of the financingmarket.