Research On The Legal System Of Market Access For Village Bank In China

Meager profits and lack of Insurance system, making China’s rural financial market hasthe characteristics of high-risk and low in come.To pursuit of high profits and avoid high-riskis the nature of financial capital.There fore, a large number of financial capital reluctant to getinvolved in rural financial markets, leading to a small number of financial institutions in ruralareas and a serious shortage of financial supply.Especially in the wide central and westernregions, financing difficulties have become a key factor in restricting the development of thelocal economy. In order to provide adequate funding for rural economic development, Chinahas carried out a series of reforms on the original rural financial institutions, such asexpanding the scale of rural financial institutions, limiting the capital flows of rural financialinstitutions and so on. However, with the Postal Savings Bank gradually becoming a“absorber” to absorbing the rural funds, it is more difficult for the reforms on originalfinancial institutions to meet the requirements of the current rural economic development. Inthe case of that the stock reform is difficult to break the plight of rural financial supply, theincremental reform has become an inevitable choice to solve the contradiction between supplyand demand of the current rural finance. In this context, the CBRC introduced the “Adviceson Adjusting and Adopting More Liberal Policies on Banking Financial Institutions’ Access inRural Areas to Support the Construction of Socialism New Countryside” in2006, whichencourages the private and foreign capitals to establish rural financial institutions. New ruralfinancial institutions, including village banks, have been established successively and developrapidly, in which the village banks are in the fastest growing in the three types of new ruralfinancial institutions.In order to promote the development of village banks better and thus contribute to theprosperity of China’s rural financial market, the CBRC has issued a series of regulations andnormative documents to relax control over market access of village banks. On the one hand,these regulations and normative documents have promoted the development of China’svillage banks by relaxing the limitations on setting up, on the other hand, considering thesecurity and stability of China’s rural financial market and the sustainable development ofvillage banks, there are a series access conditions for the establishment of village banks, suchas the qualification restriction on initiators of village banks and the reasonable requirementsfor registered capital of the village banks. These access conditions play a significant role in ensuring the safe operation of rural banks.However, with the development of village banks, our legal system on the market accessof village banks is gradually exposing some drawbacks. Through investigating the status ofthe establishment and development of village banks, I find that there are many problems inthe legal system on the market access of village banks. First, the conditions for the marketaccess of village banks are scattered in five normative documents, including the “InterimProvisions”, and the legislative level is lower, which causes that the local governmentsincrease the access conditions in the process of establishing village banks. Secondly, the“Interim Provisions” set a close confinement on the investment proportion of village banksinvestors, which leads to that the main bank initiator takes the control, affecting the villagebank’s own independence. Thirdly, the requirement for registered capital of village banks istoo low, and many village banks’ own strength is insufficient, which even affects the business.Finally, the access of village banks generally copies the commercial banks without settingtargeted access system for village banks’“agriculture-supporting”, which results in that thevillage banks can’t support agriculture enough.With regard to the problems of the legal system of market access exposed in thedevelopment of China’s village banks, we should resolve them through legislation to ensurethe healthy development of village banks. On the one hand, we should strengthen legislationon the market access of village banks, perfect the “Interim Provisions”, set strict legalregulations for the establishment and development of village banks and prevent the localgovernments increasing access conditions for village banks. On the other hand, we shouldoptimize the access conditions for village banks, promote the diversification of investors ofvillage banks, increase the requirements for registered capital and set up a specializedbusiness access system based on village banks’“agriculture-supporting”.