Legal Issues Of The Innovation Of The Financial Regulatory System In China

Financial regulation stems from the inherent instability and huge risk of financialindustry. As an important form of economic supervision and macro-control, financialregulation can ensure the stability and efficiency of the financial industry, preventfinancial risks, maintain financial security and promote economic development. Thetheoretical basis of financial regulation is the incompleteness of financial market.Modern economics, especially information economics, game theory, market failuretheory laid the theoretical foundation for financial regulation. For a country witheconomic and financial development, the openness of the financial industry willinevitably increase, while financial liberalization is bound to increase uncertainty of acountry’s economy and financial system, and exacerbate the vulnerability of theexisting financial system. In this way, to deal with a more open and complexeconomic environment, the implementation of effective financial regulation is a coreissue related with and stable development of financial industry and sustained nationaleconomic growth.Market failure will lead to confusion of the financial and economic system, andharm the development of the nation and the world economy. Therefore, thesupervision of financial instruments and financial institutions is a governmentresponsibility. Financial regulation model is based on a country’s political andeconomic development. Although the organization of the world’s financial regulatoryand legal environment, the market basis for financial institutions of the countries arevery different, but they still can be abstracted to financial regulation modes ofdifferent market environment, to then we can study the characteristics of the differentmodes as well as the state of development of the various modes and their evaluation.Development is the theme of the financial industry, and innovation is the soul ofthe financial industry. However, financial innovation raises a lot of new topics forfinancial regulatory， while financial innovation promotes financial development, it isbound to challenge the existing financial regulatory models, methods and financialregulatory system, and increases the difficulty of the financial regulation, and evenmake the previous financial regulatory system fail. In this case, the innovation of thefinancial regulatory system will become an inevitable choice.For our country, the financial risk for many years is deepening with the steadydevelopment of the national economy, and financial institutions and financial marketshas exposed a lot of serious problems. It has become a top priority of China’s financial regulatory authorities to strengthen supervision of financial institutions and financialmarkets in accordance with the law, regulate and maintain financial order, andeffectively guard against and defuse financial risks, and continuously push forwardthe innovation of the financial regulatory system.