| Related lending by controlling shareholder has become an important subject in the field of banking and corporate law. The thesis aims at studying legal foundation of insider lending, on basis of which effective legal institutions can be built up to curb related abuse.A capital paradigm has been built up by economists in the words of economics, which argues to control the insider lending by controlling shareholder through regulating capital of bank. The paradigm suggests that it is the capital that causes the related lending. The logical structure of the capital paradigm consists of three perspectives, including capital ownership, capital ratio and trade nature of the capital.The perspective of capital ownership argues that to control the insider lending by the way of controlling capital ownership on the basis that the private ownership will be more efficient than the public ownership and private ownership is able to offer enough incentive to carry out business legally. However, no matter what ownership it is, private or public, the shareholders have their own private interests and evitable moral hazard. The second perspective, which is called capital ratio, argues to control the risk of insider lending of shareholders by regulating the capital ratio of a bank. There are three views as to this perspective, the first is the view of concentrated ownership which maintains that the major shareholders will be to control the risk of lending voluntarily due to their majority shares in the bank; the second is called that of dispersed ownership, which argues that the structure of dispersed ownership can be used to prevent bank from being manipulated by shareholder; the third view argues that the ownerships above may not be helpful to build up effective corporate governance while a moderately concentrated ownership may ensure that the private bank will not be manipulated by the controlling shareholders so as to reduce the risk of abuse. However, none of the three ownerships able to avoid the problem of rational apathy, free-rider and moral hazard, and they can't achieve the goal of regulating shareholder's insider abuse effectively as well. Thus, the incidence of undue related lending doesn't equal the proportion of ownership. They are not the simple quantity corresponding relation inter se. The third perspective argues that the insider lending can be regulated by controlling the trade nature of the capital, which is also called the rule of segregation banking from the commerce.It is generally accepted that the close ties between bank and business may cause conflict of interests and incur the abuse of insider lending while proponents argue that the close ties such as mutual ownership will be efficient because it can reduce both the cost of supervision and the risk. However, this principle has to face the challenge raised by capital merging with the trend of financial liberalization and bank privatization.Therefore, the issues such as private ownership, concentrated ownership and the commercial ownership, which once were referred to reasons of related lending, in fact, are just symptoms, not reasons.Though they offered a foundation for insider's abusing. Capital itself has no direct relations with the insider lending of controlling shareholder.Obviously, related abuse couldn't be explained via capital paradigm while the paradigm of conflict of interest can offer systematic and clear explanations.The relations between controlling shareholder and other stakeholders may be the same as the agent relation. As controlling shareholders has predominating status to the bank, other shareholders and depositors, they will have the abilities of acquiring asymmetrical insider resources and information, thus they have the ability to manipulate or exert great influence to business decision in the bank. So the legal relation of related lending by controlling shareholder is accord with Conditio iuris of conflict of interests. Also insider lending by shareholders occurs frequently in the occasions of abusiveness of... |
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