On The Perfection Of The Legal System Of The Cooperation Of Banking And Credit In China

As an innovative type of business, wealth management cooperation between banks and trust companies has experienced rapid development, formed a major business area of many trust companies and aroused great social concerns in the past few years. Wealth management cooperation between banks and trust companies is the result of banks and trust companies making use of each other comparative advantage. It helps banks liquidate their stock assets, provides investment and financing channels for individual clients and enterprises respectively and facilitates financial innovation, but the emergence of new financial products also gives rise to new regulatory issues. Asset transfer and trust loan related businesses are prone to ignite systematic risks and have attracted the regulator’s attention. Since the first wealth management cooperation between banks and trust companies product hit the ground in 2006, the China Banking Regulatory Commission has published a series of regulations with a view to control risk, reduce the amount of channel business and encourage the independent and innovative development of trust companies. The aforesaid regulations to a certain extent constrain the development of high risk wealth management cooperation between banks and trust companies, but issues such as the rigid and unrealistic nature of relevant policies, the fragmented regulatory framework and regulatory arbitrage and the lack of legal basis haunt still. Such issues shall be rectified by way of changing the supervision philosophy, enhancing institutional building and perfecting the regulatory system from the aspects of both supply and demand so as to draw a balance between risk control and market activation and better fulfill the role of finance in supporting substantial economy.This thesis researches on the perfection of the regulation over wealth management cooperation between banks and trust companies through three chapters. Chapter one is a legal analysis on wealth management cooperation between banks and trust companies. It starts with the concept of wealth management cooperation between banks and trust companies under regulatory regimes, discuss about its history of development and prevailing types of business and the legal relations between parties thereto, which leads to a conclusion that wealth management cooperation between banks and trust companies consists of a principal-agent relation between banks and their clients and a trust investment relation between banks and trust companies and paves way for the coming discussion on legal risks and prevailing regulatory regimes. Chapter two includes a sharp focus on risks and problem relating to wealth management cooperation between banks and trust companies, reflecting a supervisory need over the same. It categorizes, summarizes and analyzes the current regulations and the shortages thereof, setting out issues such as the unrealistic nature of the instructive provisions, the stern mandatory provisions and regulatory arbitrage arising from the regulatory differences. Chapter three sets forth certain suggestions for perfecting the regulatory regimes over wealth management cooperation between banks and trust companies based on the research results of Chapters one and two, which comprise six pieces of suggestions from the aspects of, among others, change of supervision philosophy, perfection of system building and cross-market macro-prudential supervision with a view to benefit the prevailing supervision of wealth management cooperation between banks and trust companies.