On The Legal Supervision Of Foreign Banks

After it officially joined the WTO on December 11, 2001,China begins to cancel business limitations and geographic restrictions and client limitations on local currency business to foreign banks step by step within five years. Foreign banks in China, comparing to domestic banks, have advantage in capital adequacy, flexible managerial system, higher operational level, and business innovation. Accordingly, complete legal system of foreign banks supervision should be established in order to meet the demand for supervisory transparence after entry WTO, attain adequately market competition among commercial banks, and optimize resource disposal. The motive of market accession supervision on foreign banks mainly optimizes foreign banks entry China, which have advantage of adequate capital and advanced managerial level and are effectively regulated by regulatory authorities of its parent nations in case foreign financial risk introduce China. Moreover strict market accession is the basis of risk supervision. The key of accession supervision is the evaluation on the management level of foreign banks and the supervisory effect of their parent nations. Whereas China has not taken detailed measures now. And its evaluation is short of transparency.As the reform of financial system of China continually deepens and the business limitations and geographic restrictions on foreign banks are canceled gradually, market operation supervision on foreign banks in China is continually deepening. Foreign banks should be regulated by means of scientific legislation. The examination on new business in advance should be reduced and the supervision in the operation process and afterward should be reinforced. The risk of new business should be assessed then be reckoned in capital liability management according to risk coefficient. The risk supervision on foreign banks is the emphases and difficulty of supervisory authorities. Now in international the risk supervision on multinational banks is basically in line with Basel Accord that includes minimum capital, supervisory review and information disclosure.The prudent supervision on foreign banks mainly includes: 1)Asset Liability Proportion Management, 2) Business restriction on foreign banks. 3) The examination onmanagement organization and high level managerial personnel. These prudent supervision helps to promote foreign banks steady running. But these regulations are not enough in the aspects of the legal person managerial structure and the quantitative management about operational risk. Supervisory review of foreign banks includes on-site examinations and off-site surveillance. Daily or timed examinations on foreign banks are comprehensive and efficient supervisory measure. It is the key that all sorts of supervision measures and target put into effect. In China the examination procedure and responsibility scope of regulatory authorities should be regulated by legislation according to Basel Accord. The advice mechanism of the review result and the rating system to foreign banks should be perfectly completed. Thus the aim of entire risk supervision attain on the basis of normal regulation. The true and effective information disclosure is convenient for public to know the management situation of foreign banks. Thus it would promote the management transparency of foreign banks and moreover control foreign banks by market rule. Therefore it is an important supervisory problem to regulatory authori...