The Role Of Law On The Prevention Of Bank Risk

More and more attention has been attached to the control and prevention of bank risk since the collapse of the Barings Bank and the occurrence of financial crises of southeastern Asia. With the gradual establishment of market-oriented economy in our country and in particular against the background of Chinese entry to WTO and its rapid integration into the mainstream of the world economy, it is of urgent necessity and significance to get under control the risks of Chinese banking industry.Based upon the study of those experiences in preventing against and controlling bank risk and the lessons of international banking industry in suffering from risk exposures and particularly against the business and management risk associated with Chinese state-owned banks , the dissertation focuses upon the banking law and banking supervision and makes study upon the policies and measures by which Chinese bank risks can be properly guarded against and got under control so that the Chinese banks will be able to reduce risk degree and Chinese banking industry can get a sound and healthy development. The dissertation is composed of four parts.Part I definition : bank risk and classification;Part II analyses upon lessons of international banking industry and risk situation of Chinese banking industry. Part II makes analysis upon the lessons of foreign banks that suffered from poor risk management (examples including specific banks having suffered heavy losses and specific country having experienced financial crises) and searches out the causes of financial crises and bank risk, namely they are the improper macro-economical policy, the imperfectness of banking system evidenced by the lack of effective internal and external supervisory and controlling mechanism. Part II also studies the risk situation of domestic banks and the causes leading to the formation of those risks and the author's conclusion is that Chinese banks in particular the four largest state-owned banks are characterized by the following risks:(1)the high percentage of problem loans;(2)poor profit-earning capability;(3)few channels of generating income;(4)heavy burden of tax and other expenditures;(5)the lower percentage of self-owned capitals;(6)poor liquidity; (7)the unsoundness and imperfectness of the internal management structure risk management mechanism and company management structure; to make matters worse, Chinese banks are cornered by our social and economical environments such as the unfledged market mechanism, the poor credit degree of our community, the deficiency of legal system in protecting the legitimate rights and interests of creditors and local protectionism in subordinating banks' credits to those of local parties concerned,etc. despite the unfavorable elements mentioned above , the author still holds the opinion that the financial crises would not likely break out in china as Chinese financial system is separated from the outside world to a substantial degree and Chinese government can employ much more powerful means in regulating financial markets than its foreign counterparts.Part III the part deals with how to learn from some international organizations and states concerned in guarding against and tackling bank risks through proper legislation and risk management. Based upon the study upon the major contents and the most recent tendencies of the Basle Agreement, the author makes tentative analyses upon the major experiences and characteristics of the U.S.A and Singapore in the supervision of banking industry and makes some comments upon the risk management of Chinese banks.Part IV some reflections and thoughts upon strengthening the risk-prevention and control of Chinese bank. In my opinion, with Chinese accession to WTO and its deeper integration into the world economy and with the further opening of Chinese financial markets towards the outside world and more foreign banks penetrating into the Chinese territory, Chinese banks would be competitively disadvantaged if no more efforts than p...