Perspective On Enhanced Obligation Of Financial Holding Companies Of The United States From Referential Angle

As a form of financial mixed-operation, financial holding companies would meet specific risks except for general financial ones. With the quality of holding company, financial holding companies possess a particular character of financial mixed-operation as well. It is these two embroiled qualities that complicate the relationship among subsidiary financial institutions both legally and economically. Due to its peculiar combined quality, the company itself and financial institutions, as well as the morality of its managers, then encounter a further complexity and exposure.Therefore, the United States set up an Enhanced Obligation of Financial Holding Companies through a series of supervision and legislation. According to the stipulation, if the subsidiary companies suffer a shortage of required rate of capital adequacy, a deterioration of finance or bankruptcy, financial holding companies must help to recover financially. It is required to perform obligation above otherwise the supervisory department holds the right of punishment because of its violation.According to traditional Limited Liability, share-holders'liability is limited to his investment while Enhanced Obligation breaks through and takes a sharp turn. The theory of Enhanced Obligation is based on moral hazard of holding companies and financial institutions. It is proved by the theory and practice of the United States that holding company with its prudent supervision towards its subsidiary companies and its promoting mechanism in management bears the effect of reducing moral risks and the advantage of preventing financial risks and protecting social interest.As far as the reality and development of financial holding companies in China is concerned, it is of great significance to establish Enhanced Obligation of Financial Holding Companies in China to reinforce the supervision and improve the related legislation. Thus, a systematically deep study on Enhanced Obligation of Financial Holding Companies of the United States together with an attempt to absorb its essence embraces crucial meaning in reality.The whole paper is divided into four chapters except for Introduction and Postscript.Chapter 1: A survey and analysis on occurrence and development of specific forms of Enhance Obligation of Financial Holding Companies in United States. From the angle of supervisory policy, there are Capital Maintenance Commitments, the Source of Strength Doctrine and new policy of Closure of Banks concerned. From legislative angle, there are two aspects, cross-guarantee provision and prompt correction action.Chapter 2: Owing to its break-through out of tradition system, Enhanced Obligation of Financial Holding Companies gave rise to a profound revolution in both legislation and economy which bear a solid theoretical fundament. Consequently, the chapter herein proceeds to analyze moral hazard and expound related theories.Chapter 3: A discussion on function of Enhanced Obligation of Financial Holding Companies theoretically and practically and an analysis on defects of Enhanced Obligation of Financial Holding Companies.Chapter4: According to the reality of development, supervision and legislation of financial holding companies in China, more emphasis is laid on the influence and reference in China. A primary analysis is proceeded to prove the necessity and feasibility of establishment of the system in China with an end of putting forward legislative suggestions.