China's Legal System, The Establishment Of Financial Holding Companies

The 2006 is our country to join the World Trade Organization " transition period " of the last one year. According to the central deployment, must hold firmly to push forward the reformation of financial system, propulsion financial industry of steady step to synthesize the management to try the point. from here, quickly push forward the financial holding company lawmaking, and realizes to synthesize the management to provide the law the basis and then seem to be for our country financing institution very important.Under this kind of background, as a kind of universal structure innovation of financial institutions, financial holding company has been paid close attention recently. Related to mixed operation trend and financial institution universalization globally, Chinese finance still keeps the strict special operation and the special supervision system. There is no doubt that this arrangement will contribute to the security and the stability of Chinese finance system, but it will influence the efficiency of financial resources distribution and international competition of the financial in-stitution. In the future, Chinese finance system must improve the special financial system in order to keep up with the times. In this aspect, financial holding company is a practical choice now.Complying with the trend of financial mixed operation and all-round financial institution, the financial holding company is developing. Comparing with other single function finance organization, the FHC has the advantages of improve resource distribution efficiency, strengthen the competitiveness of financial institution, and meet customer's omni-directional financial demand. And obtaining large-scale production and range economy, cooperative effect, progressively decreasing risk is its main advantages. But at the same time, because the organization form of financial holding company has its own special defects, moral hazard and reserve choice caused by commission and agent, coordination problem and internal transaction are the main defects. Financial holding conglomerates are in large scale, and generally speaking, they are very important in the financial system, so once their internal organization and transaction problems become worse, the stability of the financial system will be influenced. Thedevelopment of financial holding company has brought new challenges to financial supervisors. In this case, the U.S.A, Germany and Japan all noticed the problems of financial holding company at the time of establishing the integrated financial system, and through legislation and reform supervisory system they have strengthened supervisions to financial holding companies. Basel committee carried on the investigation on different countries financial supervision to financial holding companies and has put forward the total supervision principle. Supervision to financial holding companies has presented the convergent trend.According to current situation of financial holding companies of our country, In the face of the mixed operation trend, our country should define the general thought of financial supervision, then the authorities of financial supervision of our country should meet the need of the new situation, on the basis of referring to financial supervision experience abroad, strengthen the supervision of the financial holding company of our country. First, define the legal status of the financial holding company;strengthen the supervision of the market access to the financial holding company. Secondly, strengthen the supervision to controlling the risk of financial holding company. It can be said while supervising the most important link in the financial holding company is supervising in the risk, especially even more important in supervision is sufficient rate and related trade to the capital. Thirdly, we should strengthen the supervision of financial holding companies withdrawing from market. Eventually, Authorities should promulgate the law of financial holding company of our own.