The Establishment Of Bank Reorganization System

As early as on 1997 September, the Basel Committee on Banking Supervision has pointed out in the "Core Principles for Effective Banking Supervision" that the establishment a set of a fast and orderly market exit mechanism is essential for an effective financial system. Meanwhile, the State Council has also stated in the "Opinions on the Deepening the Reform of Economic System " that we should establish and improve the market exit mechanisms for insolvent banks. However, up to this day, there is no market exit mechanism in our financial system. Considering the important position banks take in the financial system and the particularities of bank insolvency, every government wants to find a prudent and fast resolution regime to solve the troubled banks. Since the reorganization could maintain the stabilities of financial system, keep people’s confidence of the banking industry and preserve the going-concern value of troubled banks, it has becomes the first choice of every countryResearch on the bank reorganization means a lot for both theory study and practical operation in China. It could help to make up the insufficient theoretical studies and provide solutions that can pursue the order and efficiency while giving considerations to equity and justice to relevant problems in the reality. This dissertation starts from the basic conception of bank, and focus on the basic theories and principles of bank reorganization, legislation modes choosing, power structure, and the balance of different interests, reorganization regimes and loss-sharing mechanisms. It also makes legal suggestions built upon the combination of comparative law study and an analysis of the realities of China. As the modes selection becomes the center, this dissertation composed by three parts: the introduction, main body and conclusion. The main body could be divided into five chapters.The first chapter is a general introduction of bank reorganization. This chapter first analyzes the conception and range of bank, and then makes explanation of the possibilities and particularities of bank insolvency. A discussion of the meaning and legal features of bank reorganization is built upon the interpretation made before. In the end of this chapter is an analysis of the similarities and differences among bank receivership, bank conservatorship and bank reconstruction.The second chapter is about the basic theories and principles of bank reorganization. This chapter first focus on the basic theories for bank reorganization from the perspectives of economics, sociology and jurisprudence, discussing the advantages of bank reorganization by study the going-concern value, competition between Economic Liberalism and Government Intervention,social conflict theory and analysis of value. And then this chapter discusses the principles for the legislation of bank reorganization, which include timely intervention, fast resolution, minimum cost and balance between different interests.The third chapter is a comparative law study of legislation modes choosing of bank reorganization. This chapter first goes through the legislation of the main financial markets all over the world, especially paying attention to the amendments of law after the Financial Crisis in 2007. Three basic legislation modes are concluded from this review. And then choose the United States and the United Kingdom as the examples to make a further study, including analysis of the background and the characteristics. In the end of this chapter is a short conclusion, discussing what these modes means to China and how to make a proper choice.The fourth chapter is the discussion about our country’s choice of legislation mode of bank reorganization. It can be divided into three parts: part one is an analysis of the current status of our legal system concerned with bank reorganization and the shortages of these regulations; part two is an experiential observation about the resolution practice of the troubled banks; part three is a discussion and an analysis of what kind of mode we should choose in our future legislation. My conclusion is that we should take regulatory reorganization as the main regime and make the judicial reorganization as the second chair.The fifth chapter is about the specific arrangements of bank reorganization in China. This chapter could also be divided into three parts: part one is about the procedure of bank reorganization, the questions discussed here include the starting conditions of bank reorganization procedure and the trustee of the troubled bank; part two is about the reorganization regimes used in the procedure, the purchase and assumptions, the bridge bank and the open banking assistance are mainly discussed here; part three discusses the loss-sharing regime and puts the focus on the enhanced liabilities of financial holding companies and the bail-in arrangements.