Legitimacy And Supervision Research On The Couple Of The Deposits And Loans

In the existing market economic system of China, various state-owned and commercial joint-equity banks are playing key roles in financial field activities. As enterprises with financial license enacted by the Chinese government, banks mainly undertake functions such as absorbing the public deposit and issuing loans to the public. Due to the special and complicated national conditions of China, Chinese banks are the only legal agencies that can attract deposits, and they are protected legislatively by the country. The saving absorption of non-banks is struck by the country along with the control over lending by non-banks. Furthermore, the traditional financial concept of China is deep rooted, which directly leads to the absolute dominant position of banks in the financial activity field. With the rapid development of economic pursuit in China at present, the operation maintenance, scale expansion or industrial structure deepening of all industries cannot be separated from the support of numerous funds, then the lending of banks becomes extremely important. For banks which essentially belong to agencies of financial service brokers, the scale of loan issuance cannot be supported totally by their own funds. Therefore, it is necessary for them to absorb savings and enrich their own fund pool in order to expand the loan issuance scale. At the same time, the banking industry of China is still in the traditional foundation stage of banking operation, that is, profits are earned by depending on the fixed ratio error of the loan rate and deposit rate. This is completely different from the operation way and philosophy of foreign banks, which makes the banking industry of China to form the fixed mind of taking the interest margin of loans and deposits obtaining as the main profits source. However, the generation of such fixed mind is inseparable from relevant regulations and systems of financial management departments and operation management agencies of China. The interest rate of Chinese banks is determined directly by financial management departments in accordance with economical needs, which directly reflects the mastery of economy by the ruling class. Such simple and sweeping approach directly provides the legal guarantee of high amounts of interest margin income for Chinese banks. Moreover, such legal insurance cannot be objected by common citizens who can only execute unconditionally. As main executors of economic policies, Chinese banks have to expand the scale of lending in order to realize their own profit growth, the premise of which is that banks have to own enough assets. Briefly speaking, banks should have sufficient deposit scale. In this way, it is natural that deposit is closely related to loans. However, the connection of deposits and loans by banks has hurt legal interests of other economic activity participators. Taking the basic loan business as an example, the couple of deposits and loans mechanism required by banks have added unnecessary economic burdens and triggered potential risks for the development of the entire social market economy. The impact of the deposit-loan connection on enterprises is directly reflected on the loan issuance by banks. Enterprises are asked to make the commitment or save the equivalent amount of cash in accordance with the certain proportion of the loan amount and take it as the premise for loan issuance exchange. As for the saved fund source, banks do not care at all. Generally, enterprises applying for loans are in urgent lack of funds, then the source of funds to be saved will become a problem demanding prompt solution by enterprises. The reality is that many enterprises only exchange the issuance of loans through intermediary agents or the so-called fund brokers depending on the fund saving by other enterprises or individuals. However, it is not free for saving money for enterprises applying for loans for other enterprises or individuals. Enterprises applying for loans have to pay a certain amount to deposit enterprises or individuals, which is the so-called “interest subsidy” in the fund industry. Banks do not make any requirements for the number of this part of costs. Enterprises applying for loans and deposit enterprises only need to negotiate by themselves, which is generally different in accordance with the economic conditions of different places but usually between 2% and 4%. This part of cost has directly increased the loan coast of enterprises applying for loans. For banks, they are enterprises essentially, so it is understandable that it takes profit earning as the basic goal through normal operation. Meanwhile, deposit is one of the indexes to evaluate the bank scale, so it is in line with their own development requirements by asking for more deposits. Nonetheless, by making use of the advantageous position in financial field activities, banks are proposing unreasonable requirements for enterprises applying for loans in its operation activities, and they take it as one of the means to attract public deposit. This behavior cannot be examined only as an operation way, but reflects more about the abuse of banks’ own position. Meanwhile, after deposits are connected with loans by banks, certain number of social economy and even social legal issues will directly or indirectly be produced. The deposit-loan connection by banks makes enterprises who cannot get deposit support from other approaches unable to get loans or full amounts of loans, so that these enterprises will turn to private lending. The high interest of private lending has become the last item that overwhelms loan enterprises. Private lending has directly led to the bankruptcy of enterprises that could have maintained operation via banks. Moreover, the repayment of private lending has also resulted in many civil actions and even criminal cases relevant to personal properties. In terms of the current basic level of people’s court, the number of cases related to private lending disputes has been increasing annually among civil actions. In people’s courts where economy is developed, the number of actions about private lending disputes accounts for over 60% among civil actions of the whole year. With the daily increasing number of private lending disputes, a large number of private lending agencies have started to refuse the loan issuance to partial enterprises, so many enterprises that cannot loan could only take risks illegally by promising to give back high interests. Funds are absorbed from the masses. Finally, legal persons of enterprises may abscond to avoid punishment due to the capital chain rupture. Many people’s funds are disappeared, thus resulting in extremely adverse social influence. Such illegal fund-raising acts have been occurring frequently in recent years. Many well-known large enterprises have been involved in illegal fund raising. What’s more, when enterprises cannot get loans from banks, they would act in collusion with relevant persons and cheat others or other enterprises to save funds in the name of deposit. Saved funds are transferred through the forged seal, thus making others’ deposits theirs. Such cases have happened in economically developed areas in recent years. They not only damage the legal property right of the masses, but also lead to extremely adverse influence on the banking industry of China. Although it seems there are few economic and criminal offenses like this, the root of them is the loan taking and loan non-issuance of banks. With the construction and improvement of the Chinese economic system, prudent operation and risk avoidance are required by Chinese banks on the law basis. So, the investigation force of the loan examination has been strengthened. Rigorous control over the approval rate and loan amount of enterprises applying for loans has been carried out, thus reducing the number and object scope of loan issuance. However, enterprises in line with loan conditions are connected with deposits and loans based on the demands of the banks’ own interests. Such acts have directly led to private lending or illegal fund raising by numerous enterprises that could have got bank loans. A lot of regulatory measures have been enacted, corresponding laws and regulations as well as various forms of departmental rules and industrial rules have been developed by administration departments of the banking industry in China, and more meticulous measures have been adopted for the examination of the bank deposit-loan business. However, there have always been restrictions and supervision on the couple of deposits and loans and transfer from deposits to loans to banking administration departments and banking supervision departments in China. Furthermore, the examination and management force has been intensified year by year. Nevertheless, the act of deposit-loan coupling by banks still exists, and it has become a publically recognized potential rule of loans by most banks. The only change is that the coupling of deposits and loans has become secretly undertaken and the form of it has become more concealed. Various methods or means are taken by banks to avoid the supervision. In modern society, there are contradictions and conflicts between the development of the banking industry and the supervision of its administration departments, which is actually the disagreement between the national economic management and the social economic development. With the rapid development of the banking industry and its pursuit for connection of the global economy, the balancing between the scale expansion needs of the banking industry and the legal interest protection of participators in the economic and financial field is the main working direction of the competent departments and supervision departments of banks. Of course, formulating necessary laws and regulations, department rules and industrial rules is the basic work, but how to make the existing laws and regulations, department rules and industrial rules give full play to their roles is not only the business of bank supervisors, regulatory departments and banks, but the cooperation of all society whole-heartedly. The act of coupling of deposits and loans by banks is the fundamental cause of the political and legal system of China, which is also demanded by the economic needs of the banking industry itself. Studying the legitimacy of coupling of deposits and loans by banks is to facilitate the understanding of needs of the banking industry, so as to make it in line with the requirements of the banking industry to some degree in terms of political, economic and legal construction in the future. Meanwhile, the research of supervision over the deposit-loan coupling of banks is for the purpose of better protecting the legal rights of other economic and financial activity participators, restricting the bank power, leading the healthy and orderly development of the banking industry, relieving the social economic contradictions caused by the banking operation, ensuring the steady and healthy development of social economy, reducing criminal cases caused by economic development, and realizing the scientific and sustainable development of the banking industry of China.