Analysis Of Financial Supervision Legal System’s Perfection In China In Terms Of Macro-prudential Regulation

Financial liberalization and deregulation not only increased the financialinstability, but also created favorable conditions for the outbreak of the financialcrisis. The outbreak of the Subprime Mortgage Crisis in the United State in2008istestimony to this. As the crisis intensified, huge losses in globe financial market havestrongly reflected the fragility and limitation of the existing financial regulatorysystem, the ability of financial micro-prudential supervision to prevent and withstandrisk has been widely questioned. One key lesson to draw from this crisis would be thatgovernments and international organizations alike primarily adopted micro-prudentialregulations to supervise and regulate financial institutions, when witnessing theseemingly healthy growth of a handful of financial institutions, have all been blind tofinancial imbalances and systemic risks and therefore have failed to identify andaddress widespread risk exposures among financial institutions as well as potentialrisks caused by the procyclicality of the financial system. However, regulating theindividual institutions, in order to realize the individual financial institutions stability,can not guarantee the stability of the whole financial system. Therefore, in thepost-crisis era, it has become the consensus of the financial regulators around theworld to strengthen macro-prudential regulation, treat the financial system as anorganic whole, with a view to the whole financial system but also a single institute,focus their supervisory and regulatory efforts on the entire financial system as well asinterconnections between the financial sector and the real economy, adoptcounter-cyclical policies and other macro-prudential regulation tools, prevent andmitigate system risks, marry it with micro-prudential regulations, to maintain thestability of the entire financial system.Recent years, our country has already explored and practiced in the field ofmacro-prudential supervision, however, there still are many problems which need tobe solved. A corresponding legal system of macro-prudential supervision need to beestablished, the framework need to be perfected and the tools of macro-prudentialsupervision need to be improved. So we should strengthen macro-prudentialsupervision from the following aspects: building up the macro-prudential supervision legal system, forming a mechanism of coordination and information sharing,innovating and implementing the tools of macro-prudential supervision, marryingmicro-prudential with macro-prudential supervision, improving the capability offorecasting systemic risks and judging economic cycles, enhancing int ernationalcoordination.