Analysis On Dodd-frank Act And Its Enlightenments To China’s Financial Regulatory Reform

In August2007, the subprime mortgage crisis broke out in United States, and triggered a globalfinancial crisis, which setting off an alarm to regulatory authorities of countries in the world. The financialregulatory systems of U.S. is of world leading level, however, while in the face of complicated financialcrisis, it also remains limited, and full of flaws. In this crisis, regulatory system of U.S. has been stronglycriticized. It became the extremely urgent task for American authority to commit thorough financialregulatory reform, fix the big trauma posed by financial crisis, and regain citizens ’ confidence of finance."History gives us wisdom for advancing.” Grasping the historical venation of financial regulationdevelopment and analyzing its background could help us to deeply rethink of the crisis and conductthorough reform. Reviewing the history, we found America has experienced four regulatory periods:formation period, strictly supervision period, deregulation period and prudential supervision period. Eachchange is to adapt to economic and financial development trend. Meanwhile, they all exposed out theirinsufficient as new situation appearing, and eventually be replaced by the new one.Rethinking previous financial system of U.S., its drawbacks are obvious. Overlap and crossover in"Double-line and multi-branch" pattern lead inefficiencies and arbitrage. Lack of attention on financialinnovation and derivatives, over-reliance on credit rating agencies, all motivated the crisis. According tothem, after a tortuous negotiation, in July2010, the Dodd-Frank Wall Street Reform and ConsumerProtection Act was issued. It’s the largest and toughest act since the great depression, which represents thedetermination of policy makers on financial reform. It will lead U.S. into a new financial supervision era.The Act covers almost every aspects of finance and bases on two main points: systemic supervisionand consumer protection. The Financial Stability Oversight Council (FSOC), was established to monitorand identify systemic risks, and the Consumer Financial Protection Bureau (CFPB) to protect financialconsumers’ rights. An orderly liquidation was established to regular “systemically important" financialinstitutions."Volcker rule" was passed to address the "too big to fail" problem. Besides it strengthenedsupervision both on credit rating agencies, and financial derivatives.The financial crisis had set alarm to us, while the Dodd-frank Act indicated the direction for our financial regulation reform. Specialized regulation is our present regulatory pattern. This pattern does wellin dispersing risks, but it leads deeper problems in regulatory coordination and systematic risks regulation.After China’s accession to WTO, this problem became more prominent as the emerging of mixed operation,financial innovation booming. In recent years, China’s real estate market continues to boom, the priceremains high. It’s similar to the situation of U.S. before crisis, so that we have to be vigilant.China’s first task of reform should be perfecting the legislation. A uniform financial regulatory actshould be established to adapt to market demands, to enable regulatory compliance. In the term ofsystematic monitoring and regulation coordination, we should stick to "One bank and three commissions"pattern, write “Joint Meeting mechanism of three commissions” into the law, and establish a specializedfinancial stability regulator in due course.Then, we should balance financial regulation and innovation. Internet finance, a new financial formemerged in china, which should be concerned. With its unique advantage, Internet finance quickly occupiedthe financial market, and lashed traditional finance. Regulator obviously didn’t make adequate preparations,and lack of awareness of the risks involved. But with the further development of online finance, itssupervision and risk control are urgent, regulatory law and standards should be filled as soon as possible.In terms of financial consumer rights protection, we should construct a protection system based oninformation rights. Meanwhile, Securities Investor Protection Fund and Insurance Guarantee Fund systemshould be reformed, as well as the deposit insurance system should be established. The two funds aredysfunctional and achieve little actually, though was created more than10years. The absence of depositinsurance system is extremely adverse and dangerous, which is difficult to guarantee the healthydevelopment of the financial markets and protecting the rights and interests of financial consumers.Ultimately, credit rating system should be promoted according to its underdevelopment. Nationalaccreditation system should be implemented. At the same time, we should actively participate in theinternational cooperation, learn successful experience from others, balance international cooperation and"territoriality principle", work on international capital flow data dynamic tracking, and establish aninformation-sharing mechanism. Besides, actively promoting international sharing of our effectivemeasures is necessary to promote our position and influence in international organizations.