Research About Legal System Of Interest Rate In The Liberalization Reform Of China

Financial innovation means the self-breakthrough and evolution of whole financial sector, but also means the challenges and destruction to the existing financial legal system. The market-oriented reform of interest rate, as an important measure of financial innovation, is supposed to fit with the legal system. Also, the law should provide the legal justification for the reform.In the long historical period, China implements interest rate control in the process of economic development. The People’s Bank of China is endowed with the power of administrative control to the interest rate by the law. And it regulates that commercial banks and other financial operators must comply with People’s Bank of China, in regard to the decision of rate-setting and management. The so-called market-oriented reform of interest rate is aiming for deregulating the controls of interest rate, allowing commercial banks and other financial institutions to fully enjoy the pricing power of interest rate, flexibly self-determine and adjust the rate level of financing, based on market supply and demand.Through the research of legislation of the reform in China, we find out that there are still a lot of deficiencies in the existing laws and regulations about interest rate, in terms of core legal system, financial supervision and related system. So as to, it cannot provide systemic warrant for the successful completion of the market-based reform of interest rate.In order to ensure the smooth implementation of market-oriented reform of interest rates in such a context, the first thing needed to do is amending "Commercial Bank Law", "People’s Bank of China" and other core legal system, conforming, setting and protecting the pricing power of commercial banks and other financial operations; secondly, it needs access to the rational design of the financial supervision legal system about bank entree, competition and self-regulatory, giving PBOC and CBRC full play to the functions of financial supervision, preventing abuse of the pricing power of interest rate in commercial banks and other financial operators, eliminating and reducing various arising risks that could be brought by the deregulation of the interest rate; Finally, it should establish a sound supporting system about, such as, bank bankruptcy, deposit insurance and social credit, to protect the legitimate rights of financial consumers, and to maintain the security and stability of the financial operation.