The Risks And Supervision Of Financial Holding Companies

As the financial globalization springs up, competition in this area has become worldwide. A strict supervision may put financial institutions into inferior position in the face of competition. Therefore, most countries loosen their financial supervision and mixed operation begins to be a tendency in financial industries all around world.According to the Chinese financial system—separated management andsupervision between industries , financial holding company is a practical way to integrated operation .But as well as huge advantages, financial holding company also brings some new problems, such as intra-group transactions, conflict of interests, double or multiple financial leverage, lack of transparency and conflict of interests. How to constitute a suitable supervision system for China's financial holding companies so as to effectively keep in control the risk brought by these companies? This is an important issue which brooks no delay. This author tries to give an answer to this question in hope of offering some references for the theoretical researches and practice of the regulatory system of financial holding companies in China.This paper consists of five chapters.Chapter 1 summarizes the supervision and regulation of financial holding companies. First it introduces the concepts, characteristics, categories of financial holding companies, and analyzes the development of financial holding companies in China from the point of institutional economics. Then it summarizes the theoretical basis, supervision system and the main contentsChapter 2 introduces the latent risk and problem of financial holding companies. Besides risks of all kinds of professional financial operation, because of complex organizing structures and internal relationship, some new particular risks are raising, such as re-calculation of capital fund, relating exchange, the risk transmitting inside the group, the lack of transparency for the information. Since the outer condition and the particularity of financial institutions of our country, the financial holding companies in China are quite different from those in the foreign countries, which are introduced in the article.Chapter 3 introduces and analyzes the condition of financial holding companies' supervision in China. At present, the problems such as the supervision system, the blank of law, the uncontrollable of risk in financial holding companies are still in existence.Chapter 4 analyzes the cases of two representative financial holdingcompanies—CITIC Holdings and Delong Group , from the point of risksupervision in financial holding companies.Chapter 5 makes suggestion to China's supervision of financial holding companies according to the former analysis.The following methods are used for dissertating in the article.1. The comparative method. Aiming at the practice of international supervision of financial holding companies, it compares the modes and contents of the decentralized and centralized supervision, which supply reference to the practice in China. From the point of risk supervision of financial holding companies, it compares and analyzes CITIC Holdings and Delong Group, which gives up suggestion to China2. The qualitative analysis. The qualitative analysis method is used to demonstrate the definition of financial holding companies, basic accordance of supervision, and the form we use to build our supervision system of financial holding companies.3. Case studies. The most representative financial holding companies in China, CITIC Holdings and Delong Group which happened a big crisis, are chosen and analyzed from the point of risk supervision of financial holding companies. On the basis of studying the particular risk of financial holding companies, it researches on China's supervision of financial holding companies.The innovation of the article lies in the cases' analysis on CITIC Holdings and Delong Group from the point of risk supervision of financial holding companies. The author found out the difficulties of setting up models, the lack of the statistics of financial holding companies' supervision in foreign countries and Delong Group, which are the shortcomings of the article. These shortcomings enlighten the future direction of studying.