Legal Barriers For Commercial Banks To Carry Out Intermediate Business Analysis

Since the beginning of 1980's, with the development of capitalmarket and increase of financial innovations, the revenue of traditionalbusiness has been accounting for less of the total business revenues ofcommercial banks, the interest spread of deposit and credit has beennarrowing and customers' demand of business has been becoming morecomplicated, which have made intermediary business a requisite for thedevelopment of banks. Meanwhile, accompanying China's entry intoWTO, the gradual deregulation of financial institutions of foreign capitalinto China's market and the ever-increasing competition, it is natural thatintermediary business should be expanded to guarantee the developmentof commercial banks. To develop intermediary business of banks in Chinaneeds discussions of and research on relevant problems of legal systemsconcerning it as the legal systems are the basis on which business starts.Good operations of intermediary business of foreign commercial banksrely heavily on the well-established legal systems and there is acomplicated legal relationship between intermediary businesses whichmay cause legal risks easily if they are not well regulated. However,intermediary business started late in China and laws concerned arelagging behind, so banks face more risks in operating intermediarybusiness, which to some extent limits the its development in China. The paper begins with the definition and contents of intermediarybusiness of commercial banks, probes into the current development,opportunities and regulations of intermediary business in combinationwith an understanding of the historical development of intermediarybusiness of Western commercial banks and features in the growth ofintermediary business of China's banks, gives a brief analysis of itsvarious types, discusses the patterns and strategies, and explores thesupervisory systems and manners appropriate for the development ofintermediary business of China's banks. The paper also points out that weshould absorb the successful experience of intermediary business ofcommercial banks in Western countries and guard against the legal riskslikely occurring. Moreover, it discusses relevant legal problemsconcerning intermediary business, analyzes its institutional causes oflagging behind in the development and how to expand intermediarybusiness systematically, and illustrates some of the tactics andsuggestions which may help ultimately realize the transformation ofcommercial banks to modern operation models. In the paper, there is a comparison of types of intermediarybusiness and relevant legal systems between commercial banks in Chinaand Western countries. It makes clear that suitable legal environment isthe important basis for the development of intermediary business ofcommercial banks, as is the case in Western countries and the growth ofintermediary business can promote that of legal regulations and vice versa.It also explains the causes of rapid development of intermediary businessof Western banks with its well-established legal systems. AlthoughChina's banks have realized the importance of intermediary business,banks face more legal risks in tapping it for lack of relevant regulations,which limits its development to certain extent. Thus there are somepractical values for China's banks to absorb Western banks' experienceand guard against possible legal risks arising to promote the developmentof intermediary business. The problems of intermediary business of China's banks for lackof legal regulations are as follows. First comes the problem of defects in legislation. Though there arequite a number of laws concerning intermediary business, few of them arespecifically aimed and easy to follow. Among them, more laws pertain totraditional intermediary business and fewer concern with new types,which result in a lack of legal criteria for those intermediary business.Legal regulations were issued by different administrative departmentsshort of coordination and some regulations issued earlier were out-dated.The laws are not in accord with international pr...