Study On The Effectiveness Of China's Financial Regulatory System

The global financial turbulence arising from the sub prime mortgage crisis has hit global economy hard.The sub prime mortgage crisis originated from the extensive default in sub prime mortgage loan and the depreciation in the value of the derivatives designed from such kind of loan.It exposed the deficiency in the financial regulation to the public and taught a lesson to China.The lack of financial regulation is a hotbed for financial crisis and turbulence, so it is urgent for China to review its financial regulatory system,find the existing problems and promote further reform and perfection of its financial regulatory system.In order to determine the direction of the reform,the primary task is to evaluate the effectiveness of the financial regulatory system and point out the issues,as a foundation for seeking further solutions and exploring future direction.The goal of this paper is to solve for such primary task,focus on the effectiveness of China's financial regulatory system and disclose the possible issues to the public.At the beginning,the paper elaborates the development of the theories on effectiveness of the financial regulatory system,sets forth the basic six characteristics of an effective financial regulatory system as one of the evaluation criteria for the effectiveness of China's financial regulatory system:clear regulatory goal,appropriate regulatory measures,strong regulatory capability,proper independence of regulation,effective regulatory cooperation,and minimum regulatory cost.The financial regulation is so complex and multifaceted that,after describing the current situation of China's financial regulatory system,the paper intends to analyze its effectiveness both generally and specifically.Firstly,the paper generally demonstrates that by using the above six characteristics of an effective financial regulatory system to gauge China's current financial regulatory system,it has been properly designed,but is still lacking in clear regulatory goal and efficient regulatory cooperation mechanism.Then the paper respectively looks back on the regulatory progress of the three major sectors of financial industry-banking, securities and insurance,assesses the effectiveness of the regulation on those three sectors and enumerates several problems that have adversely affected the effectiveness of the regulation. After discussing the effectiveness of China's financial regulatory system from a general view, the paper turns to some specific hot issues-the separation and cooperation of PBOC and CBRC,the conflicts and coordination of PBOC and CSRC,the regulation on financial innovation,hoping to inspect the effectiveness of China's financial regulatory system from a completely new aspect.Finally,based on the evaluation results derived from the above reasoning,the paper concludes that China's financial regulatory system may to some extent fit the current financial situation, but it still calls for improvements and reform.The reform shall adopt the following four approaches:study the cooperation mechanism and remove the conflicts among the financial regulators,make clear the notion of functional regulation and expand the utilization of the method of functional regulation,push forward the legislation in financial regulation,and improve the traditional regulatory measures and strengthen the control of the financial risk.