Research On The Control Of Financial Holding Company's Internal Risk

During the later of 20th century, a new kind of financial innovation organization mode, financial holding company which was promoted by many factors such as, the economic and financial globalization, information revolution, especially the waving of financial liberalization and financial deepening wave, developed rapidly all over the world. Recently,in China the mode of financial industry which is very strict is"transforming from separating-operation to multi-operation.". But after more than thirty years high speed development, some commercial banks, brokers, insurance groups and some financial companies of the large-scale group companies became financial holding company or quasi financial holding company. Here it is certain that financial holding company is a kind of effective organization mode that helps decentralized management transforming into mixed-business management.The financial holding company managed to organize various stakeholders together by a series of contracts, which realized the effective control between parent company, subsidiaries and sun companies. It saved a large number of operation cost after the group's internal resources conformity, overall planning and strategy management, which realized the company's own maximum interests during the serious competition in the financial sector. The displayments of the financial holding company, such as economics of scale effects, economics of scope effects and operating fit the needs of the development of economy and finance. Meanwhile, the financial holding company not only has to face the general risks that other independent financial institutions are facing, but also has to face the special risks in this mode and be able to control the risks. The general risks including market risk, operational risk, management decision-making risk, risk of capital-adequacy radio, and so on. The special risks including moral risk which caused by information asymmetry, opaque risk, risk transference, interest conflicts, and so on. In this paper, the author take CITIC Group as an example analyses the risks, especially the special risks the financial holding company facing and suggest the company establish internal risk-control indicator, the internal risk-warning mode and the internal risk-control system.