Discussion On The Financial Risk Prevention Legal Mechanism Of The Micro-credit Companies In Guangzhou Civil Financial Street

With rapid development of the private economy, the private capital is accumulating rapidly. Because the private capital’s investment system in our country is not perfect, the flow ability of private capital is poor, and investment channels are limited. Large amount of private capital rushes into the underground illegal institutions, bringing about great threat to the stability of the finance order, and the illegal fund-raising cases occur from time to time. In order to regulate the private investment, the CBRC and the PBC issued “the guiding opinions on the pilot of the micro-credit company” jointly in 2008 to promote the pilot work of the micro-credit companies comprehensively. In order to further standardize the development of the micro-credit companies and strengthen the supervision of these companies’ financial risk, Guangdong Province established the first civil financial street, Guangzhou Civil Financial Street, in June 2012, which attracts the existing and newly-established micro-credit companies through providing subsidies, better supporting services and other measures.For the past three years since it was established, Guangzhou C ivil Financial Street has acquired some achievements on the prevention of financial risk for the micro-credit companies, but it also exposes a lot of problems. In order to prevent the financial risk of the micro-credit companies, Guangzhou C ivil Financial Street has established a special set of legal mechanisms of the financial risk’s prevention, such as strict access permission mechanism of the market, the on-site inspection system, the off-site supervision system, regulatory rating system, the credit agency from the third party, Guangzhou C ivil Fina ncial C hamber of Commerce, the risk disposal mechanism, the civil finance(Guangzhou) price index system, etc. The legal mechanism of the financial risk’s prevention of the micro-credit companies has been initially established, but, strictly speaking, the legal mechanism of the financial risk’s prevention is not perfect because of its sensitive policy. The main imperfections of Guangzhou C ivil Financial Street’s legal mechanism of the financial risk’s prevention of the micro-credit companies include these aspects below. The first is defect of the micro-credit companies’ regulatory legislation, which includes the low legislative level and the uncertainty of the micro-credit companies’ legal status. The second is defect of the micro-credit companies inner financial risk prevention system, which includes weak inner risk prevention, illegal unlisted business, and weak liquidity of the limited financial resources. The third is defect of the prevention system of the micro-credit companies’ external financial risk, which includes limited access to credit information of borrowers, and the high possibility of systematic risk due to the high concentration of loan transactions. The fourth is defect of the administrative supervision system, which includes unclear supervising subject, weak supervision power, low efficiency of the on-site inspection system and the off-site supervision system, poor implementation of the regulatory rating system and the joint meeting of supervision system. The fifth is defect of the industrial self-regulatory system, which includes ineffective implementation of industrial self-regulatory and absence of the special self- regulatory system.Improvements of the legal mechanism of the financial risk’s prevention of the micro-credit companies in Guangzhou C ivil Financial Street can be taken in five respects: improving the regulatory legislation, improving the prevention system of the micro-credit companies’ inner financial risk, the prevention system of the micro-credit companies’ external financial risk, the administrative supervision system and the industrial self-regulatory system. In the aspect of the regulatory legislation’s improvements, measures can be taken through improving the legislative level, confirming the supervising subject and the micro-credit companies’ legal status, loosening the establishment conditions of the micro-credit company. In the aspect of improving the prevention system of the micro-credit companies’ inner financial risk, measures can be taken through strengthening the inner risk prevention and increasing financing ability. In the aspect of improving the prevention system of the micro-credit companies’ external financial risk, measures can be taken through improving Guangzhou Civil Financial Street Credit Companies’ credit database, strengthening the supervision of the highly concentrated micro-credit loan transactions, legality audit and compliance audit of the micro-credit loan. In the aspect of improving the administrative supervision system, measures can be taken through improving the on-site inspection system and the off-site supervision system, confirming the supervising subject of the micro-credit companies in Guangzhou C ivil Financial Street, strengthening the administrative supervision structure and the supervision power, improving the regulatory rating system and the joint meeting of supervision system. In the aspect of improving the industrial self- regulatory system, measures can be taken through strengthening supervision of the industrial self-regulatory mechanism and improving Guangzhou Civil Financial Chamber of Commerce’s structure.