Research On Legal Issues Of Regulation Of Internet Financial Holding Company

Due to the need of financial globalization and the development of financial market,the pace of financial mixed operation has never stopped.Substantial financial holding companies have long existed in China's financial market.With the advent of the Internet era,emerging technologies rise rapidly,and the financial market presents a situation of the integration of Internet technology and traditional finance.With strong technical advantages,Internet enterprises not only develop Internet financial business,but also acquire or set up traditional financial institutions to seek organizational forms with higher synergies and scale effects,thus evolving into Internet financial holding companies with prominent features of platform and digitalization.At the same time,traditional financial holding companies are also actively exploring how to use fintech to improve efficiency.In the long run,all financial holding companies may eventually evolve towards the direction of Internet financial holding companies.In this context,the regulatory authorities have introduced relevant financial holding company supervision measures,with a view to strengthening the overall supervision of financial holding company and speeding up the improvement of the shortcomings of the supervision system.However,the initial legislation still fails to respond well to the challenges posed by Internet financial holding companies to the concept,mode and content of supervision.Therefore,it is urgent to respond to the relevant legal issues concerning the supervision of Internet financial holding companies,so as to guide the healthy development of Internet financial holding companies and prevent systemic risks.In the process of development,the organizational structure of Internet financial holding companies changes from chaos to clarity,and the combination of financial business and original business gives rise to the characteristics of "taking comprehensive service platform as its external appearance and deep digitalization as its internal logic".Further,the two characteristics of platformization and digitalization are the source of the differences between the supervision of Internet financial holding companies and that of traditional financial holding companies,as well as the logical starting point and basis for countermeasures to their supervision problems.In this regard,to clarify the challenges of Internet financial holding companies to the legal system or the particularity of their supervision,it is necessary to analyze them from four aspects,namely,the concept of supervision,the legal relationship,the regulation rules and the regulation technology,so as to accurately grasp the challenges of this innovative legal subject to the supervision.In terms of regulatory concept,the lag of traditional financial regulation cannot effectively regulate Internet financial holding companies,which are complex and changeable financial subjects with mixed operation.In terms of legal relationship,Internet financial holding companies not only involve central and local financial regulators,but also tend to infringe on the rights and interests of financial consumers in the use of data due to their business mode.Meanwhile,the problem of algorithm black box will also make it difficult for the subject to be held accountable.At the level of regulatory rules,not only is there no appropriate legal rules directly applicable,but also the comprehensive service platform that it provides services to the outside world is not subject to corresponding supervision.In terms of regulatory technology,there are problems such as doubt of authenticity,lack of comprehensibility and obvious lag in the way of data collection by traditional financial regulators,and they are not suitable for Internet financial holding companies with dynamic and changeable business models and data interchange.At the same time,the technology of Internet financial holding companies has both external and internal risks.To analyze and correctly understand their sources is the key to improve the supervision technology and prevent technical risks.The supervision of Internet financial holding companies should choose the concept of technology-driven supervision to realize real-time and dynamic supervision,so as to alleviate the problem that the traditional supervision method is not in step with the evolution of fintech technology.It should also adopt the concept of supervision of the supply of public goods,which pays attention to the balance between supervision and industrial interests,provides positive externalities for market innovation from the perspective of overall governance,promotes the convergence between regulatory rules and industrial rules,and can take into account the stability and development of Internet financial holding companies.Furthermore,the principles of data penetration,reasonable disclosure and comprehensive coverage will be integrated into the construction of the regulatory system and rules of Internet financial holding companies,so as to seize the invariable nature of financial supervision,balance efficiency and safety,and implement the top requirements of Financial Stability and Development Committee on financial supervision.The regulatory mode of Internet financial holding companies should be optimized under the existing regulatory framework,which can not only reduce the cost of supervision,but also reduce the compliance cost of the regulated institutions.The current supervision model has identified the central bank as the main supervision agency of Internet finance holding companies,clarified the supervision rights and responsibilities of the central and local governments in Internet finance holding companies,and further improved the cooperation mechanism led by the People's Bank of China under this framework.At the same time,it will give play to the buffer role of industry associations between regulators and financial institutions,and require all companies that meet the definition of Internet financial holding company to register with the industry association,which will be a prerequisite for applying for a financial holding company license from the People's Bank of China.At the same time,the model of emerging business is also put on record in the association,so that the industry association and regulatory agencies can assess the risk of emerging business.Finally,a three-level supervision system of "central-local-industry association" covering all financial institutions and financial businesses will be constructed.Formulate supervision measures specially applied to Internet financial holding companies.Among them,the definition of Internet financial holding company should not be too rigid.Internet finance is characterized by disruptive innovation,which often starts in marginal markets and focuses on long-tail users.If the identification conditions are limited,only some Internet financial holding companies with large scale that substantially control typical traditional financial institutions should be supervised,which is not in line with the guiding spirit of bringing financial activities into the supervision.The scope of Internet financial holding companies should be appropriately expanded,and all Internet financial holding companies should be supervised by the way of identification by the central bank and filing by the association.In the face of Internet financial holding companies with licenses,the central bank should take external and internal factors into consideration to formulate differentiated regulatory guidelines for their implementation.This not only guides the development direction of Internet financial holding companies,but also saves regulatory costs to a certain extent.At the same time,the regulatory measures require the emerging businesses or products of Internet financial holding companies to be tested in the regulatory sandbox led by the People's Bank of China on the basis of the record of the industry association,and the products that pass the test can obtain regulatory permission and fully enter the financial market.In view of the platformization,digitalization and monopoly behavior of Internet financial holding companies,multi-dimensional regulatory means and rule design are needed.Firstly,by building a supervisory data platform and embedding supervisory procedures,the business and data circulation can be monitored in real time.Second,implementing regulatory sandbox tests,establishing review rules for algorithmic models,and using regulatory tools or approaches such as innovative business risk assessment models to address the risks posed by fintech.Moreover,the supervision of monopoly behavior should clarify the powers and responsibilities of regulators and strengthen supervision cooperation,and explore the formulation of rules applicable to the monopoly examination of Internet financial holding companies in terms of supervision rules.Internet connection transaction regulatory financial holding company is through the establishment of a firewall system,and to develop comprehensive information disclosure system for regulation of unfair related transactions,and disclosure system can improve its platform transparent degree,help the financial consumers know Internet financial holding company provided the operation mode of the financial business or product.The improvement of the supervision on balance sheet consolidation of Internet financial holding companies starts from the two dimensions of regulators and financial institutions,focusing on the capital adequacy ratio and the scope of balance sheet consolidation of Internet financial holding companies,including their special purpose entities in the scope of supervision,and formulating the guidance for financial institutions to conduct balance sheet consolidation management.At the same time,the Internet financial holding companies are required to set up a special management organization for the balance sheet.The corporate governance of Internet financial control companies should not only perfect the governance organization,but also establish the service evaluation standard and risk management committee suitable for the particularity.At the same time,regulators should also establish an evaluation system for the corporate governance of Internet finance holding companies.Finally,the problem of financial holding company on the Internet and crisis handling,build appropriate increase responsibility system to prevent moral hazard of the holding company and reversed transmission holding company committed to its internal review,to legalize the marketization disposition mechanism and the disposal program,to reduce the probability of a government bailout,promote fair competition of the market.Facing the Internet financial holding companies with full technological advantages to carry out cross-border business,it is unprecedentedly important to strengthen the international cooperation of supervision between countries.In the process of international cooperation in supervision among countries,China's Internet financial holding companies have a leading position in the world,and have the foundation to become the leading country in international cooperation in supervision of Internet financial holding companies.In this regard,Chinese regulators should actively utilize the Principles of Financial Group Regulation(2012 Edition)of the Joint Forum,explore the export of China's regulatory experience through the G20 framework,take the lead in formulating international fintech standards,and enhance China's voice in international financial regulation.