Regulation On The Obligation To Dislose Of The Commercial Bank In Structured Financial Products

With financial innovation emerging endlessly，financial institutions begin tomove into mixed and provide diversified products and services. As the major financialinstitutions, the business of commercial bank is also expanding and innovating. Since2005, Minsheng Bank first launched RMB Structured Financial product，it hasdeveloped very rapidly. Compared with the traditional financial product, it isprofessional and complex financial derivatives, more flexible and border investmentchannels across the bank, securities and trust business.In the field of Structured Financial product, financial consumers are naturally theweaker party in information, due to the limitation of knowledge, experience, propertystatus and other aspects. The Commercial Bank with information advantage bears theobligation of providing information to make the consumers clear. We can only findout the CBRC department rules about the obligation to disclose of the StructuredFinancial products, including “the sales management approach on commercialfinancial products”,“the risk management on personal financial services of thecommercial bank”.The department rules have low rank and the protection theyprovided is not enough.The theme of this paper is the obligation to disclose of the commercial bank inStructured Financial products, it can de divided into four chapters: The first chapter introduces the concept, categories of the Structured Financialproduct and tries to clarify its legal property. It is a combination of income securitiesand financial derivatives, that made a high-risk,high-yield. But the CBRC on itsdefinition is divorced from the operation. Then it discusses the obligation to discloseof the commercial bank. According to the principle of equality of civil law, the bankas the strong party of information has the obligation to disclose, which is a civilobligation, unlike the administration obligation of information disclosure systemapplicable.The second chapter elaborates the need for the commercial bank to build theobligation to disclose. Firstly, it discusses the characteristics of structured financialproducts and several elements of its liability to disclosure. Secondly, the provisions ofour obligations to disclose sporadically appears in the departmental regulations ofCBRC. The separate supervision and legislation is not conducive to uniformlegislation development and prosperity of the financial industry. Finally, the bank staffin structured financial products sales process, explains nothing or in a false way,which hurts seriously to the interests of consumers. This is the leading cause offinancial disputes.The third chapter presents commercial bank the basis of the obligation ofregulatory initiatives—the standards of the obligation to disclose. The CBRCdescription of the obligation to disclose exposed many problems and defects,compared with Japan, South Korea and Taiwan. The author uses pertinence,accessibility and intelligibility, three pivots to set up the standards of obligation todisclose.The fourth chapter, after summarizing financial obligations of the consumerprotection legislation on financial instruments of many countries and regions, itproposed a three-step initiative closely. Firstly we should improve the obligation oflegal hierarchy, enrich the contact of the obligation, and look up to the financialuniform legislation; secondly we should set Compensation Liability, deploy theburden of proof and reasonable configuration, define the scope of compensation fordirect financial losses. Finally, we should bring in the third-party dispute resolution mechanism, to establish an independent, unified financial consumer protection agency,as an external dispute resolution.