Legal Problem Of Commercial Bank Bankruptcy

All commercial entities , including financial institutions , with impoverished management in intense market competition would be generally ended up in bankruptcy. Cautious attitudes are usually taken in every country to commercial bank failure for banks' special and great important role in the nation's economy. Over the long period of time problematic financial institution have remained in China under the administrative protection of the Government, and thus systemic laws and regulations for commercial bank failure have not yet been established ever since. At the end of the year 2006, the financial market in China came to be thoroughly open and administrative protections are disallowed by the principle of fair play. However , the protection of that kind only leads to continuing accumulation of risks that worsening problems and higher resolution costs, and is much unprofitable to the finance safety and economy stability in China. The newly issued Law of Enterprise Bankruptcy of the People's Republic of China in Aug. 2006 has in the first time definitely concerned with commercial bank failure , which means that financial institutions in market economy are no longer special legal entities in law. There are some provisions in China with regard to revocation of failed commercial banks, but they are scattered in various laws and regulations and would not be efficient in dealing with such great crisis as commercial bank failure. Therefore, it is necessary for China to build up systemic bankruptcy laws particularly for financial institutions , in which should definitely regulate the powers and obligations of the pertinent authorities, by giving the supervising authority the prime status in dealing with failed commercial banks, to avoid repeating or conflict in duties amid various official agencies. Judicial scrutiny is necessary in surveillance of exercising powers to ascertain the transparence of making determination and protect the public profits as the final safeguard.General bankruptcy laws may be precisely applied to failed commercial banks in many countries, while there are still some bankruptcy laws particularly for commercial banks in other countries. It has been pointed out in The Guideline for Efficient Bankruptcy System by the World Bank that the policy targets the clauses of reorganization and liquidation served for in general bankruptcy laws are in most cases similar to that of commercial banking laws, except that there are some essential differences in dealing with particular issues. This paper introduces the basic facets of the laws from the prospect of the possibility of commercial banking bankruptcy , the necessarity of commercial banking bankruptcy , the specialness of commercial banking bankruptcy, with comparisons to the general bankruptcy laws. Also it states what special measures the western developed countries frequently take in the process of dealing with failed commercial banks, such as USA, England Japanese and so on, and the powers and obligations the supervising institutions or deposit insurance institutions have during the process. At last , it outlines the current laws and regulations in China for commercial bank bankruptcy and presents some suggestions for dealing with the problems of commercial bank bankruptcy in China, such as bankruptcy reorganization of commercial bank, bankruptcy liquidation of commercial bank , and so on .