Legal Issues Research On Risk Control Of Trust Loans Of Bank And Credit Co-financing Products

The cooperation between banks and trusts is believed to be the best mode of the trust business'development, which satisfies the demand of diversified source and application of funds, which is also an approach to financial innovation. Since the first bank and credit co-financing products came out, our banks and trusts cooperating market has come into a fast developing period, and its scale have become more and more huge. Especially since 2007, the cooperation between banks and trusts have gradually developed into the major operating platform of domestic co-financing products. The financial academia and legal academia have different opinions about the risks hided in the bank and credit co-financing products, while the regulators have never loosened their supervision of this kind of products. The disputing case between China Everbright Bank (Cebbank for short) in Taiyuan and Anxin Trust & Investment CO.,LTD (Anxin for short), rose to the surface in 2008, have brought vast concern among regulators and legal scholars, whether in or after the first trial. Because the case exposed that there were some illegal operation problems in the trust loans of bank and credit co-financing products. Besides, the practice which used legal form to reach to illegal purposes have also caused amount of loss of investors. Anxin said that the Cebbank seriously violated its duties and deceived the customers, and brought bad social influences. This case warned that people in the business should review the risks and responsibility identification of the cooperation between banks and trusts from a new angle, which also became a typical case in risk-control of trust loans of bank and credit co-financing products.There are many risks in the course when the trust loans of bank and credit co-financing products are designed, exploited and put into the market, such as market risks (not discussed in the article ), credit risks, operational risks and legal risks and so on. The harmful levels of these risks are different, and we will list them in the article in detail. What cause these risks come from subjective and objective issues of banks, trusts and users of the fund. The risk-control methods refers to self-discipline and regulatory constraints on both banks and trusts, rights protection of the investors and creditworthiness of users of the property are referred indirectly as well. Besides, there are some examples where our existing laws and institutions define blurred or conflict with each other, which need to be detailed and unified to play their deserved ruling and guiding role better.