On Legal Issues Of Transnational Bank Insolvency

As a result of operation failures, transnational bank withdraws from the market which conforms to the market economic rule that is survival of the fittest. However there are no unified rules relating to the transnational bank insolvency in the world. Most countries always adopt the fundamental theory about the bank insolvency and the common enterprise transnational insolvency. Therefore, research on legal issues of transnational bank insolvency can provide theoretical basis for establishing unified transnational bank insolvency rules in the world, and is the requirement of global financial integration. China's research on the transnational bank insolvency has just started, so the legislation is still blank. But as the international financial competition intensifies, transnational bank insolvency has become the problem, especially in the circumstance that China has entered WTO and the financial industry has been opened completely. Therefore, making a thorough study on the related legal issues of transnational bank insolvency has important theoretical significance on building legal system and rules of transnational bank insolvency in China. The thesis makes a deep analysis and research by using comparison research method and relating to the transnational bank insolvency practices.Apart from the introduction and the conclusion, the thesis includes five parts.The first part expounds the definition and characteristics of transnational bank insolvency. Transnational bank insolvency refers to the transnational bank which has branches overseas. Compared with domestic bank insolvency and the common enterprise transnational insolvency, the characteristics of transnational bank insolvency involve the uncertainty about the jurisdiction, the universality of creditors, the diversity of petitioner, and the complexity of law applicability.The second part explores the procedure legal issues of transnational bank insolvency, which mainly concerns the petition of transnational bank insolvency, the jurisdiction of transnational bank insolvency, and the extraterritorial effects relating to the announcement of transnational bank insolvency. The petitioners are the transnational bank itself, the creditors of the transnational bank and the supervisory authority. As far as the jurisdiction is concerned, the jurisdiction of the main insolvency proceeding is entitled to the home country, but the jurisdiction of the ancillary insolvency proceeding is entitled to the host country. For the extraterritorial effects relating to the announcement of transnational bank insolvency, there are different theories—universality principle, territoriality principle and new pragmatism. Concluding from other countries' legislation and practices, the limited universality principle is recognized by most countries.The third part explores the substantive legal issues of transnational bank insolvency, which mainly includes the cause of transnational bank insolvency, the decision maker of transnational bank insolvency, the coverage of bankruptcy estate of transnational bank insolvency, and the liquidation preference of transnational bank insolvency. The causes of transnational bank insolvency involve: insolvency, overindebtedness and regulatory insolvency. The decision makers of transnational bank insolvency are the supervisory or the judicial authority. As to the coverage of bankruptcy estate, there are two theories in the world which are single-entity doctrine and separate-entity doctrine. Single-entity doctrine is more practical. With respect to the liquidation preference, the thesis mainly analyzes the depositor preference rule and the liquidation preference of depositors in different countries.The fourth part discusses the prevention and assistance of transnational bank insolvency. Transnational bank insolvency should be based upon the active prevention of transnational bank insolvency, which mainly be reflected in strengthening the cooperation of the transnational banking supervision. On the one hand, we should allocate the supervisory responsibility of the home country and the host country. On the other hand, we should promote the information sharing between them. Once it is inevitable for a transnational bank to be bankrupt, we should establish the deposit insurance system in order to reduce the negative effects of bankruptcy.The fifth part discusses the legal countermeasures of dealing with transnational bank insolvency in China. At present, there is no explicit legal rule governing the transnational bank insolvency in China. In addition, the practice is not unified. On the basis of the above conditions, the thesis puts forward some detailed countermeasures, which include adopting limited universality principle and single-entity doctrine, defining the cause of transnational bank insolvency, defining the petitioner of transnational bank insolvency, establishing deposit insurance system about transnational bank relating with China's condition, and taking active part in international cooperation in transnational bank insolvency.