Studies On The Legal Issues Of Banking Systemic Risk Supervision

Under the trend of financial globalization and financial innovation, intrinsic risks of banking industry are constantly accumulating, and the frequency financial crisises suggest that there are great problems in recent international banking system. Among those financial crisises, the systemic risk is the most notability one, while the supervise inefficiency in this risk means that it has institutional flaws in the recent banking supervision system. With the development of financial integration, systemic risks of global banking industry are constantly booming, at the same time, the possibility of the explosion of systemic crisis still exists. In order to response to it, all national regulators must enhance effectiveness of banking supervision system through varieties of methods and measures and strengthen the cooperation and coordination in the financial regulation. However, there are many defects in traditional external regulation system, internal control system and market discipline mechanism should be strengthened further. In the meantime, governments around the world and relevant international organizations should establish more effective international supervision system in various bilateral and multilateral approaches.The thesis consists of six chapters and is organized as follows:ChapterⅠmakes discussion about concept of banking systemic risk, supervisory subjects and the court in financial supervision system, and review the development of legal system on systemic risk supervision with several major banking crisises. In sum, banking systemic risk is the possibility which minority institutions cause the whole banking system instability, while the serious systemic crisis may have an adverse effect on macroscopical economic system. Considering the problem of dysfunctional government supervision, it is necessary to bring internal control and market discipline into the system of banking systemic risk supervision. In other words, it is important to build a multiple-governance structure for banking systemic risk supervision. Additional, the incomplete law theory illustrates that court and regulatory authority as external supervisors can’t solve market failure completely. In the history, the occurrence of banking systemic crisis and the reform of banking supervision system accompany always accompany each other, while institution revolution and legal innovation are achievements of human reflecting financial crisis constantly.ChapterⅡanalyses institutional issues on external supervision system. The problems about effectiveness of capital regulation and moral hazard of deposit insurance and lender of last resort flawed the traditional banking safety net seriously, therefore, regulatory authorities have to further strengthen and develop loan restriction, leverage limits, liquidity provide, preventing panic and other potential approaches. Because national regulatory authorities exercise jurisdiction parallel, there are many positive conflicts or negative conflicts in banking systemic risk supervision which would create banking systemic risk. Above all, national supervisors have to improve cooperation and coordination with each other. Systemic events often can be directly attributed to bank management blunders or regulatory dereliction, thus it is essential to investigate corporate body, bank managers, professionals and even regulators for legal responsibility for preventing banking systemic risk.ChapterⅢconcerns the internal control system of commercial banks, based on system designing and surveillance practices. Internal control serves the purpose of eliminating systemic risk from source, although the system can have limited effect. On one side, banking institutions should build and improve internal control system in five aspects, including management oversight and the control culture, risk recognition and assessment, control activities and segregation of duties, information and communication, monitoring activities and correcting deficiencies. On the other side, regulating authorities and external auditors ensure soundness and effectiveness of the internal control system thorough various surveillance practices.ChapterⅥmakes arguments on banking systemic risk market discipline, and emphasizes the importance of information disclosure in market discipline system. While the substantiality of market discipline has been empirical support by economists, the major problem is how to achieve the market discipline system efficiently. Particularly, it is the basic institution to build incentive mechanism for risk prevention by depositors and other creditors, and information disclosure mechanism is the precondition to make efficient function of market discipline.ChapterⅤregards practical and reform issues on international supervision systems of banking systemic risk. European Union has make some gains in theoretical research and regulatory reform of systemic risk, but the recent pan-European supervision scheme is faced with many theoretical and practical barriers. The "soft law+soft organization" model represented by Basle system of banking supervision has some advantages, but it can’t solve defects of international banking system fundamentally. Above all, all governments and international organizations have to be united to manage banking systemic crisis and international financial crisis, and it is the trend to build global supervision system for systemic risk supervision in future.