On The Legal Regulation Of Credit Default Swap Risk In China

As a credit risk mitigation tool,Credit Default Swaps(CDS)have a positive effect on the use of China's bond market to mitigate credit risks due to bond defaults.Everything has two sides.The 2008 financial crisis revealed the risks of CDS and the further improvement of the legal regulatory system is essential.The incomplete legal system is also one of the reasons for the uncontrollable risks.And so further improvement of the legal regulatory system is essential.In order to improve the legal regulation system,first of all,this article needs to study what is the CDS.Research from two aspects of transaction mode and legal nature.This paper studies the two transaction processes of CDS and the situation of functional alienation in the development.Based on the understanding of the transaction structure of CDS,the paper discusses the legal nature and analyzes and concludes that CDS is a financial product sales contract.Second,study the risks exposed by CDS in practice.Combined with specific cases,the main risks are analyzed from two perspectives of contract subject and contract performance: Supervision system and risks caused by lack of supervision;Risks of default due to qualifications and credit problems of counterparty parties;Risks of excessive leverage caused by functional dislocation.Third,analyze the current status of credit default swap risk regulation.The analysis shows that the current shortcomings in China mainly include: low level of legal documents,multiple and scattered regulatory bodies lead to inefficiency,Information disclosure system is too formal,unclear function positioning,low qualification requirements for counterparties,imperfect supervision system.Finally,combined with the,exposed in practice and the current status of legal regulations,analyze specific methods toimprove its legal regulatory system.In the process of improving the regulatory system,we must not only grasp the flexibility of the financial market at all times,but also deeply realize the function of CDS to mitigate credit risk,adhere to the principle of controllable risks,and weigh the safety of CDS Value orientation of sex and efficiency.First,focus on the overall layout,improve the legal supervision mode,and pay attention to the power of functional supervision on the basis of the separate supervision mode in China.Under the guidance of the supervision mode,clarify the main body of legal function supervision;Second,to build a comprehensive system for dealing with counterparty issues.The three aspects of the system are to deal with counterparty risks,including increasing the threshold of access conditions,improving the scientific credit rating system,and improving the central clearing system so that transactions can be cleared on a standardized platform.Third,conduct legal design for the information disclosure system,and strive to change the information disclosure of credit default swap from formalism to substantiveism.As a contract for the sale of financial products,the information disclosure of CDS must be based on the implementation of the principle of risk relevance,clearly disclose the main body and strictly require the scope of disclosure,and recommend measures to actively encourage the disclosure of predictive information in the scope of disclosure.Fourth,recognizing the original intention of the design of CDS,always insisting on the security-oriented function of CDS.Combining these four points,the overall planning of the corresponding system will be improved,and the legal regulatory system will be improved to ensure that CDS can really play a role in mitigating credit risk and maintain stable development of the financial market.