Research On Enhanced Obligation System In Financial Holding Company

Enhanced obligation is the proper system of the financial holding company. It means the capital assistance obligation the financial holding company offers to its financial subsidiary company that lacks the solvency, or the obligation that pays for the losing of the special organization caused by the actualizing of the saving insurance of the insolvent financial subsidiary company. Moral risks go with limited liability system and deposit insurance system from the emergency of the latter ones. The major stockholder may not consider the benefit of other stockholders, the creditors and other correlations to pursue high income. The risks have the tendency to enlarge because of the characters of the financial holding company. On the one hand, the limited liability of the financial holding company is not quits with the legal control of its subsidiary company. The Holding Company may control its subsidiary company by reducing its losing furthers. It can transfer asset among the subsidiary companies to elude the legal duty. On the other hand, the financial holding company is a pattern of mixed operation in financial industry, the risks of different financial industries are different. Mixed operation may increase the speed and probability of the risks' conducting among different industries. The enlarged risks can be realized by affiliated transaction between parent-subsidiary corporations and subsidiary companies. The enlargement of moral risks caused by the characteristic of Holding Company and mixed operation exists in the economy of China, and this can be realized by affiliated transaction. At the same time, considering the fetching up of the government supervision system, the establish of the saving insurance system, the increment of the state funeral, the restrain of the excessive founding of the financial holding company, the introduction of the enhanced obligation system is necessary, and the idea is doable in economy, law and technique. This can be established from sources of law, applicable scope, duty content, applicable mechanism, administering measure, remedy procedure and so on.