Research On The Banking Financial Institutions Retreating From The Legal Mechanism Of Risk Sharing

Despite the complete regulatory system,banking financial institutions in the fierce competition may also exist market exit risks.To deal with such risks,China takes undifferentiated government bailout to avoid risks or allows banks to exit and at the same time uses public funds to take all risks,and these practices lead to serious moral hazard problems and low operating efficiency in the banking industry and bring heavy burdens to the national finance.In the era of free banking,banks as the same as company,depositors took market exit risks,and this was proved to be the root cause of the banking crisis.Therefore,scholars and China's regulatory authority advocated that combined risk-sharing arrangement of the multiple subjects fairly share banking market exit risks should be used to deal with the difficulties and generally considered that shareholders,management,interbank and state are all the appropriate risk-sharing subjects.However,it is difficult to realize these risk-sharing arrangements obviously depending on the main market subjects and through the contract and other means.Mandatory interests adjustment by law is an inevitable choice to achieve banking market exit risk fair sharing,that is,the allocation of risk sharing obligations,compensation rights as well as corresponding regulatory powers and responsibilities.Although China has formulated the Deposit Insurance Regulations,the CBRC has repeatedly mentioned in its policy documents that private banks should have their shareholders take the residual risk,but the existing laws of China are difficult to achieve the ideal fair and reasonable exit risk sharing by scholars and regulatory authority.It is difficult to require the management to share banking exit risks under the existing law,and it only stays in the policy file for the shareholders to share exit risk arrangements with low effectiveness,fuzzy provisions and lack of universality and operability.The Deposit Insurance Regulations need improving and should coordinate with other risk-sharing regulations to better play its role in disposing the market exit risk of small-scale banks.The law should make clear the application conditions,funding sources and decision-making procedures for the state to share the exit risks and its role in disposing the exit risks of large-scale banks to avoid the return to implicitguarantee.In view of the above legal issues,the author drew on the useful experience of foreign banks in the reform of the legal mechanism of risk sharing and combined the local resources in China to put forward specific recommendations to construct and improve the legal mechanism of risk sharing and from the perspective of risk-sharing and regulatory system.In addition to the introduction and conclusion,the article contains the following four parts.1.General analysis of market exit risk sharing of banking financial institutions.From the perspective of finance,the banking market exit risk sharing is that the stakeholders including diverse market subjects and the state share the loss fairly in the case of banking market exit.From the perspective of law,the banking market exit risk sharing uses interests adjustment by law to realize the ideal state in finance through legal mechanism.The so-called legal mechanism includes two levels.First,in the institution level,the risk-sharing sub-systems are realized through power allocation.Second,in the system level,the interests adjustment is realized through the allocation of risk-sharing obligations and compensation rights.The legal mechanism can provide clear expectations for the protection of depositors' interests,so it can realize the exit and overcome the spread of bank run and banking crisis,and the state's failure experience in taking all exit risks confirms again the necessity to construct and improve the legal mechanism of risk sharing.2.Evolution and reflection of legal mechanism of market exit risk sharing of China's banking financial institutions.China has experienced the evolution from the state's implicit guarantee to the deposit insurance regulations to the regulatory requirements of private banks' commitment to take the remaining risks.However,there are still following legal issues in terms of the current legal mechanism of banking market exit risk sharing: First,various sub-systems within the legal mechanism still need improving,such as the adverse impact of implicit guarantee,function defects and moral risks of deposit insurance regulations,shareholders' remaining risk-sharing arrangements only in the fuzzy requirements and practice at the regulatory level with conflicts against the superior law,and difficulties of existing regulations in requiring the management to share banking exit risks due to its illegal or immoderate behavior.Second,the legal mechanism lacks of corresponding implementation security system with a regulatory dilemma requiring shareholders and management to share banking exit risks.3.Reform of foreign banking financial institutions in legal mechanism of market exit risk sharing and reference.In the era of free banking,depositors' taking risks was proved to be the root cause of banking crisis,so a number of countries have established the deposit insurance system to share banking exit risks and compensate for the loss of depositors.However,in the practice of deposit insurance,it gradually shows its drawbacks so that many countries in the legal mechanism reform stress the obligations of shareholders and management in banking market exit risk sharing,which realizes the diversification of risk-sharing subjects and reflects the consistency of income and risk.To sum up,the following four aspects can be learned from foreign reforms.First,the risk sharing arrangement is institutionalized and the legislation is flexible.Second,the regulatory function of the deposit insurance institution is improved.Third,the risk-sharing subjects of banking market exit are diversified.Fourth,the particular compensation for depositors and incentive compatibility are in dynamic development.4.Improvement of legal mechanism of market exit risk sharing of China's banking financial institutions.First,the multi-layer flexible legislation mode should be used to build the legal mechanism to adapt to the development of financial markets.Second,the amendment at the regulatory level of market exit ensures the implementation of risk sharing sub-systems,including the strengthening of the regulatory functions of deposit insurance institutions and the improvement of the extended regulation of shareholders.Finally,the special liability system of management,taking the remaining risks system of shareholders,deposit insurance regulations and state final risk-sharing system were built and improved,and the internal coordination between the sub-systems was strengthened to achieve multiple subjects fair and reasonable risk sharing of banking exit and ensure orderly exit.