Legal Prevention Of Financial Crisis

Financial crisis is categorized as debt crisis, currency crisis, subprime crisis, bank crisis and other crises. Financial crises in recent years have increasingly tended to a combination of various patterns, not the single pattern any longer. How to establish efficient legal mechanism to cope with and prevent various complex financial crises has become an issue which needs to be paid much attention to. With the development of society and economy, fiancéhas become the top priority of modern economy, whose central position has determined that financial crisis makes up in modern economic crisis. The major reasons for the breaking up of financial crisis lie in the following three aspects: the first is insufficiency of financial supervision, the two is wrong currency policy and the three is inappropriate financial policy of real estate. The influence caused by the current financial crisis has gradually intruded into entity economy and further aggravated the current financial crisis even more. The influence of financial crisis depends not only upon the nature of the crisis but also the treatment means of the crisis, including the countermeasures adopted by other countries in the world. From the perspective of the development of the current crisis, the crisis in America is a relatively heavy financial crisis. The influence and harm of the American subprime crisis on the countries in Eurasia is further aggravated. The problems encountered by us are how to cope with financial crisis and how to avoid the occurrence of another crisis. we should find out the corresponding measures so as to lessen financial crisis on the pressure and influence on Chinese economy by deep research on financial law, fiscal law and social security. The first is to strengthen risk awareness and establish prevention mechanism. We should, pursuant to the requirement of Scientific Outlook on Development, accelerate the advancement of financial reform and opening up, transfer the means of financial development, earnestly prevent various financial risks, defend the bottom of systemic and regional risks and more support and serve economic and social development. We should establish and improve the system of loan management liability, strictly carry out the management on the assets-liabilities ratio, strengthen and improve internal inspection system of financial institutions, especially more inspection into the transaction of financial derivatives; establish and improve early-warning system of the risk, by designing a complete set of risk index system and strengthen beforehand control of the risk from qualitative and quantitative analysis; establish certain legal early-warning mechanism, find out corresponding legal measures, correctly set up legal treatment procedures for the disposal of various financial crisis cases, and establish and improve various mechanisms for risk counter, prevention and resistance; establish and improve deposit insurance system, protect the interests of the depositor, maintain the faith of the bank and play the role of stabilizing financial order. The second is to implement provocative employment policy and establish legal security to ensure employment. Upon the influence of financial crisis, the employment rate of the society is low and financial crisis also has produced great influence on the whole society and economy, which will seriously restrict the means adopted for economic resuscitation and essentially drag the speed of economic recovery. The main contents in coping with financial crisis and strengthening legal building in China are to further strengthen the legislation on finance, improve supervision law on finance and tamp the base of financial law. Specifically, we should strengthen the financial legislation on the following: 1. to accelerate the legislation on financial holding companies; 2. to accelerate the legislation of the equality of credit; 3. to build an improved legal system of the safety of the credit card; and 4. to set up legal system for the guarantee of finance and taxation. The last is to strengthen the supervision on financial derivates. In the meantime that China issues outside new financial innovated derivates, we should fully learn the lesson of American subprime crisis and strengthen the supervision on financial derivates in an appropriate and overall way. The first is to formulate an enactment to comprehensively supervise the outside financial derivate market within the shortest time. The second is to achieve the equality of functional supervision and institutional supervision and coordination, which shall coordinate with each other, closely cooperate with each other and jointly play the role of supervision. The next is that financial institutions shall strengthen internal control and well implement risk control from the internal. We should, from the requirements of the different aspects of clients investment and financing and risk management, closely follow up, continuously analyze market tendency and devote to designing structuring products with apparent market value; regard client risk evaluation and product risk disclosure as the base of the development of the derivates, develop the structuring products appropriate to risk recognizance and tolerance of the investors and take product risks and benefits into consideration in designing and innovation of the product; and steadily raise management on structuring risks, improve the capacity of value evaluation, measurement, management on market risks and credit risks and efficiently control innovation risks of the derivates.