Research On The Risks Of Trust Business In China

At present, trust business in China is carrying out a correction of organizations and reorganizations of assets tensely and efficiently,With the made and the growth of Chinese economy, trust business will gain a new development opportunity. How to control the risk of trust business is directly related to the development of trust business in China after being corrected and separate operation. According to that, the author of this paper explores into the issue of how to promote the development of trust business in China from the angle of risk control.The system of trust originated from Britain. Trust means that a principal entrusts his property right to a trustee, which bases on trust, then the trustee manage or dispose of the right for the benefit of a beneficiary on the basis of the will of the principal. Trust business is one of finance businesses, which specially handles various trust operations. As a kind of financial organizations, trust organization may suffer from financial loss due to the uncertainty which causes the expected revenue is less than the cost. According to the source of risk, the risks of trust business mainly consist of policy risk, market risk and operation risk, and so on.Trust business came into being in 1920s in China. The trust business have resumed and developed in response to the requirement of economic restructuring. The trust business have played a positive role in Chinese economic development and financial reform. Due to the imperfection of law system and management measures, etc, the trust business in China has being corrected for five times. The risk of trust business in China mainly manifests as followings: Ratio of bad assets is too high; There is no stable liabilities support; The capital scale is too small; The operational scale is too small; There are too much unregulated credit which is not related to trust. The Risks is institutional, openly and no one bears the responsibility.The risk of trust business in China is mainly caused by the following factors: Firstly, the orientation of trust business is not scientific. The incorrect orientation has caused the constitutional dissimilation of trust operations, deviated from the nature of trust. It has also caused too many pluralistic operations and low consciousness of risk control, secondly, the property right of trust organization is unclear and governance structure is not perfect. That makes the property right and the running right separated invalidly, the problem of controlling enterprises by insiders arise and the operational risk increase. Thirdly, the internal control mechanism of the trust organization is not perfect. Trust organizations often pay too much attention to enlarge operational scale and don' t care about the internal control mechanism enough. This makes revenue decrease, risk increase. Fourthly, the legal system and regulationsfor trust business are not powerful and systematic. This makes the uncertainty of trust operation increase because it makes the risk of trust operation lack of a forceful external control mechanism. Fifthly, the adminitrative intervention in trust business by local government is too much. Because the pluralistic aims of the local government are different from the aim of the trust company which mainly owned by the local government, the conflict of the two bodies' interest have caused the low efficiency of the investment and finance and added more risk to the trust business. Sixthly, there is a not good social credit system. Trust is based on credit. The lack of social credit concept has increased the credit risk of trust business.With the made and implementation of the 'act of trust' and ' management Measures for Trust and investment company' , the problem of the orientation and operational scope has been solved. According to the analysis mentioned above and the demand to trust business in the future, The measures to control the risk are mainly the following: Firstly, The system of property right and governance structure of the trust company should be scientificly reformed. T...