On The Legal Issues Of The Supervision Of Foreign Banks

What plays a crucial role in every country’s national economy is the financial industry, whose pivot is the banking sector. Due to importance of banks, many countries, especially developing countries have been cautious about the opening up of this area and adopted a highly protective policy. However, with the opening up of banking markets around the world since the late90s, the policies to protect the local banking sector and policy barriers blocking the foreign capital investment directly into the local banking market are gradually loosened or eliminated in the emerging market countries.Since the reform and opening up, especially after China joined the WTO, the access to China’s financial market has gradually increased, and foreign banks have been developing rapidly, which have exerted a considerable influence on China’s financial system, pushed forward the reform of China’s financial sector, and also promoted China’s economic development. Yet we must see that, the key to these positive influences lies in the effective supervision over and guidance of the foreign banks in China, without which, the national economy will be threatened. The negative impact of foreign banks on the host country’s economy is mainly reflected in the financial risks brought by the non-compliance or non-sound operation. The purpose of setting up branches in foreign countries by some multinational banks is to avoid the laws of the home country and shifting their own burden of business risk.[1]The outbreak of the new global financial crisis since July2007has raised people’s concern and alertness to the risk of financial system. Foreign banks are likely to be affected by the financial crisis, particularly by the situation of the operation of the banks in their own countries, thus special regulatory measures are required in practice. Confronted with the stern global financial situation, it is very important to analyze and improve the legal and regulatory supervision over foreign banks, which is what this thesis probes into.There are four chapters in this thesis.The first Chapter focuses on the overview of foreign banks, i.e. the definition, necessity, and the fundamental system of foreign banks.The second chapter compares the legislation of foreign banks supervision in different countries in order to provide valuable experience to improve our supervision over foreign banks. First, those in USA, Japan, Korea and Singapore are taken as specimen of the developed countries and emerging market countries respectively; Later, as embodiments of local economic globalization, those in EU and its members will be discussed.The third chapter is on the international cooperation of supervision over foreign banks based on the analysis of the Basel financial services system.In the end, the fourth chapter is on the supervision legislation for the foreign banks in our country. The business condition of foreign banks is introduced here, and both the status quo and the current problems in the supervision legislation for foreign banks are analyzed. Based on the above and experience in international bank supervision legislation, a proposal to improve our supervision legislation over foreign banks and suitable for the conditions of our country is put forward here.