Characterizing And Regulating The Legal Framework Of Bank’s Personal Financial Products

In recent years, the wealth management business of commercial bankis developing rapidly. Up to first half of2013, the balance of commercialbank’s financial products has increased about two trillion yuan. However,disregarding the profits of financial products, the huge systematic risks ofthese financial products have emerged. The financial product of HuaxiaBank named ‘Zhongding’and the financial product of China ConstructionBank named ‘Zhengda Taurus’ have caused the cash crisis of the banks.Thus, it’s high time to identify the legal system of the commercial bank’spersonal financial products and avoid the risks.First of all, it’s importantto define and classifythe commercial bank’spersonal finance products. And then, based on the classification, the legalrelationship of bank’s personal financial products is confirmed.Accordingto empirical analysis of the data about issuance quantity and investmentdirection of bank’s personal financial products, we can find that currentmode of operation will lead to legal problems, such as the funds of thefinancial products cannot be isolated from bankruptcy;‘funding pool’operation mode results in unequal rights and obligations of investors;custodian of commercial bank’s personal financial products cannot play arole of supervision; hasty risk tolerance assessment of investors may cause moral hazard. Therefore, methods should be taken to conquer the problemsabove. Commercial bank’s personal financial products should be placedunder the legal framework of trust. Furthermore, the system of independentcustodian, accounting and qualified investors must be established.