Study Capital Regulation Of Financial Holding Company Legal Issues

Capital regulation is the foundation of financial regulation system, but the traditional capital regulation is institution-based. With more and more countries and districts recognizing the financial holding company as the institutional base of financial convergence, financial holding companies make new challenges to traditional capital regulation. How to reduce the regulation burden to the financial holding companies and their subsidiaries with keeping the financial system stable is a prominent task to the regulatory authority and researchers. This article analyzes the legal problems about capital regulation of financial holding company based on foreign legislature and theories. Remarkably, the capital regulation of financial holding company includes the capital regulation of controlled regulated entities, but there is so much research about this problem. So this article focuses on the complementary capital regulation except those regulations. The first chapter introduces the theoretical foundation of capital regulation and its main contents, and then discusses the challenge that the financial holding company make to the traditional capital regulation based on the development of financial holding company, especially in China. The capital regulation of financial holding company should resolve such problems as escaping from regulation, capital arbitrage, "double gearing" and excessive leverage, and so on. The second chapter concerns the regulated entities of capital regulation of financial holding company. As emphasizes several times, the author believes the financial regulation is not naturally necessary, and we must prove it. This chapter analyzes the regulated entities vertically and horizontally. Vertically, the regulated entities include controlled banks, security companies and insurance companies, but also financial holding company and financial conglomerate composed of them. The article considers it is necessary to regulate the capital adequacy of financial holding companies and financial conglomerates. Horizontally, the article discusses whether it is reasonable to exclude the insurance companies to the capital regulation of financial holding companies and to include unregulated entities to the capital regulation of financial holding companies. The author concludes it should include the insurance companies to the capital regulation of financial conglomerate and deal with unregulated entities according to their different kinds. The third chapter mainly analyzes the criterion of capital regulation of financial holding company. The criteria of capital adequacy of banks, security companies and insurance companies have been prescribed in most countries and districts. As concerns the criterion of financial conglomerate's capital adequacy, the Joint Forum issued some papers. This article introduces the methods how to calculate the consolidated capital ratio prescribed in those papers. The author believes that it is reasonable to prescribe several methods of calculating and allow the regulatory authority to select the most suitable method to particular financial holding company and combine the methods when necessary. The method of calculating the capital ratio of financial holding companies should be confirmed according to the regulated entities controlled by it. If the financial holding company controlled bank, the method should refer to the provision of the bank industry. If the financial holding company controlled securities company and insurance company, the method should refer to the provision of insurance industry. The fourth chapter discusses the regulation measures of capital regulation of financial holding companies. The regulation authority could use prompt corrective action to regulate the financial holding companies and subsidiaries that didn't meet the regulatory requirement. This part discusses the expanding obligation of financial holding company in U.S., and concludes that the reason why expand the obligation of financial holding company is the regulatory deterioration. So we should construct the...