Research On Rural Bank Supervision Legal System Of China

In order to solve the problem of financing difficulties in China’s rural area, village bank wasestablished in2007. During the years in the development and grow of the rural bank, rural bank doesaddress some issues such as financing difficulties in rural areas, but how to guarantee the sustainabledevelopment of rural banks remains to be thought about. With the constant development of rural bank, itssupervisory issues are also increasingly raised. In addition to Rural Bank Management Interim Provisionsreleased in2007, supervision of rural bank is enforced with reference to the supervision of commercialbanks, although it plays a supervisory role, it is not in the rural bank’s own characteristics. Hysteresis ofLaw slows the pace of development and scale of rural bank, supervisory department lacks legal basis fordealing with related issues in law enforcement, so its legitimacy has been called into question. existingsupervision regulations are more references to the criteria of commercial banks which are obvious differentfrom rural bank, resulting in denial to scientificalness of legal regulation; regulatory organization becomesweak leadership of a central government because there is no relative more effective law to make it clear,and supervisory style and regulatory information do not cooperate with each other and share, therefore,regulatory efficiency is greatly reduced. The thesis, starting from the particularity of rural bank, analyzeshow rural banks should conduct market positioning, how to better serve for farmers and small andmicro-enterprises by improving quality of service and innovating credit products. Through analyzingfinancial institutions in two foreign countries that are similar to rural bank, the thesis summarizes the pointsthat suitable for rural banks to learn, so as to ensure the healthy and sustainable development of the ruralbank.The first part firstly based on “three agricultural” issue that Chinese Government has been focused on,introduces history background of rural bank; secondly, the thesis describes four features of ruralbank—property structure diversified, governance structure modernization, specific operating target andmanagement mode differentiate; thirdly, from the feature of targeting operation in rural bank, the thesisexplained the legal nature that rural bank belongs to commercial banks but non-policy bank; finally, thethesis discusses regulatory targets of rural bank from three aspects, including to ensure its agriculture-supporting aspect and profit, to ensure sustainable development of rural bank and how to evadefinancial risks of rural bank.The second part, setting United States Community Bank and Indian rural bank as examples, from thestatus of legislation, regulatory bodies, supervision responsibility and risk control measures and otherdifferent aspects, analyzes legal supervision system of community banks in different countries, and drawson the experience and lessons and perfects the rural bank supervision, so as to ensure sustainabledevelopment of rural bank.The third part is about the current situation of rural bank supervision in China. Firstly it lists existinglaws and regulations on rural banking regulation, and then explains inadequacy of rural bank supervisionfrom the several aspects, such as regulatory personnel insufficient and lacking professional knowledge;launched banks holding high proportions, resulting in relative concentrated equity structure of rural bank;Government giving rural bank market positioning for “three agricultural”, but in operating process, tomaximize profit and avoid risk, rural bank deviates from market positioning standard of “three agricultural”service; financial products of rural bank are similar to local credit unions and City firm, but its creditcapacity is far less than credit unions and City firm. Financial products innovation lacks features, whichgreatly reduced the competitiveness of rural bank; if the government do not guide, it can also lead to a slowdevelopment. Current situation analysis of China’s rural bank supervision and deficiencies identify helps toimprove regulatory measures and to guarantee the healthy development of rural bank.The last part illustrates how to perfect the rural bank regulation in several ways. Should first takeappropriate regulatory innovations, classify supervision, regulators should rational allocate supervisionresources and innovate regulatory approaches in the regulatory process, at the same time with strictsupervision, it should not compress space needed for rural bank development so as to guarantee thedevelopment of rural bank. Secondly, improve sponsor system and ownership structure, properly handle therelationship with sponsor, timely open equity and encourage private funds. Thirdly, strengthen governmentsupervision on rural bank and strengthen coordination between local governments and regulators. Finally,perfect market withdrawal and access mechanisms, appropriately raise the shareholding capital especiallyprivate capital investors, the relative majority of shares can raise private capital stake limit, so as toimprove the existing single largest shareholding structure of rural bank, both to address this shortage of rural banks and prevent interference by insiders over the operation or control. Developing marketwithdrawal of accountability in rural bank can effectively prevent the moral hazard problem of seniormanager, clearly identify whether it can transfer of the stake or not in rural bank, whether shares transfereedoes have clear rules or not and so forth, can discharge the shareholder’s worries.