How to optimize financial regulation: the focus of China's financial sector as the center or the sub-sector regulatory

Keywords: financial regulation / supervision of focus / sub-sector regulatory

Summary: financial crisis, countries more deeply aware of the financial regulation for a variety of measures a country's financial Industry, Hennessy has a vital significance from foreign experience, focused on monitoring weakens the intensity of the pursuit of different regulatory goals, coordinate The effect is not as expected, and "super" regulator will inevitably close to the current political and government, contrary to the establishment of an independent, professional regulatory bodies in mind. follow the Law and financial regulation within the requirements of the realities in China, adhere to and improve the regulatory system with sub-sector ought to rationality, it is conducive to professional and independent financial regulation based on the optimization and can be combined with accountability, the implementation roles and responsibilities, and strengthen the regulatory effect.



I. Introduction

On the occasion of the international financial crisis from ever recovering the occasion to strengthen and optimize the financial regulation, has become the choice for the light structure of the system an important influence on behavior [1] (P6), what system of financial regulation mode, For the financial performance and soundness is essential, of which separate operation, or a mixed operation of monitoring, centralized control is an important topic worthy of study. before the financial liberalization and international development, countries financial deregulation was to allow financial institutions to engage in high-risk, high-return derivatives business, to encourage the establishment of financial groups, financial institutions, opening up cross-Industry business, almost laissez-faire, the crisis played a contributory role for the financial crisis, national financial regulatory reform are focused on correcting lax regulation and eliminate blind spots, emphasizing the functions of regulatory authorities, financial stability, reflecting the modern market economy and the deepening of the relationship between government regulation as the perpetrators of this financial crisis, it is also world model of the U.S. financial system, its financial regulatory reform has attracted worldwide attention, just put the <<Dodd - Frank 2010 Wall Street Reform and Consumer Protection Act>> In addition to concern about systemic risk, the new Financial Stability Oversight Board to establish coordination mechanisms also limits the size of financial institutions and businesses, the establishment of the Consumer Financial Protection Agency (CFPA, or things to strengthen the problem-based ideas and practices of monitoring (Note: See <<U.S. financial regulatory reform bill signed by President>>, http: / / news.xinhuanet.com/world/2010-07/22/c_12359257.htm (Xinhua, July 28, 2010 visit this background, this paper intends to implement China's financial Industry and the need for separate supervision its perfect for a number of discussions.

Second, the legitimacy of its border financial supervision

Financial regulation is regulation or legal regulation of the area, is the government or bear the functions of the government, but not incorporated in the sequence of the regulatory body (as a government "white glove" so-called "independent" regulatory bodies for financial institutions and financial markets, management, supervision, also known as financial supervision.

Finance is the blood of the Economic system, a commercial or market areas. The free market and government regulation is the eternal contradiction, the concept and practice of liberal advocates of the "invisible hand" to deny the legitimacy of government regulation, but in the market a second failure, including financial regulation, including various regulatory quietly developed can be sure that the complete denial of free market and planned economy to market, are not established, the key is between the market and government regulation be well, and seek balance between the two.

The legitimacy of financial regulation, the first from the market mechanism exists about the fLaws and deficiencies. First, the nature of the market and competition-cum-superiority is survival of the fittest, the market's business cycle is inevitable, and "eliminating the poor" means Some individuals and businesses, groups, industries, regions and other lost in the market competition, Economic downturn, the unemployment rate will be high, people's incomes and living standards to reduce, if not properly resolve the members of the community to be "eliminated" or downturn of livelihoods and development, you will inevitably cause social disorder or even collapse, which requires the government through taxation, planning and industrial policy, currency, interest rate, market management and other means for co-ordination of Economic, regulatory, for which only private ownership is not enough, also need to state ownership, cooperative system to cope with the implementation of the "mixed economy." Second, there is a market area of ​​less than or not the market economy depends on the impulse-profit members of society, therefore, is not profitable or difficult to profit cause the product can not be provided by the market if such a cause, products required for the community and the people, the government had to assume in the business, provide product liability, such as education, health, infrastructure, public utilities and new energy development in the U.S. response to the crisis of the $ 787 billion, there are 65% for investment, investments mainly in infrastructure and new energy. (Note: See <<Obama signed the $ 787 billion Economic stimulus plan >>, http://news.xinhuanet.com/photo/2009 -02/18/con-tent_10838401.htm (Xinhua, January 11, 2010 visit. Third, the so-called market mechanism, that is, in every society members on the basis of profit-maximizing spontaneously join forces to reach efficiency, order and optimum allocation of resources. In order to pursue their own interests, the greed, fraud, extortion and other moral hazard is inevitable, the process control needs to be minimize negative effects, if its adverse effects are concentrated outbreak, also need to pick up by the government on behalf of the community, such as the U.S. federal government took over Fannie Mae and Freddie Mac (Fannie Mae & Freddie Mac (Note: the nickname of the two agencies whose official name, Fannie Mae is the Federal National Mortgage Association (Federal National MortgageAssociation, FNMA, Freddie Mac is the Federal Home Loan Mortgage Corporation (Federal Home Loan Mortgage Cor-poration, FHLMC., aid big to "fail" AIG, remediation guise from He's pocket "money," the investment bank, control of enterprises receiving government assistance, executive compensation, and so on.

Specifically, there are several financial issues that need supervision.

1. The financial system, there are information asymmetries. The free market can effectively diversify risk and achieve optimal allocation of resources on the premise, is full of information and market information on the subject of symmetry due to financial, virtual sex, size of financial institutions, financial Industry, professional and business practices complexity, and compared to other products and services, financial information asymmetries that exist are more prevalent, more serious. If the asymmetry of information, in theory, can not achieve effective risk sharing, the practice is more prone to internal control in order to post self-serving, absconded with money, worthless securities, payment can not, market manipulation, insider trading and other issues. for the study and solve these problems, it is required for financial regulation undertake an important task.

(2) financial market public goods nature of financial market stability are critical for the overall Economic significance, this is where it's the nature of public goods for decades, complex, high-yield, emerging high-risk financial products, financial market for innovation and prosperity, but in the financial and economic crisis, individual investors or financial loss of business is a small matter, what matters is the behavior of individual companies or finance and national economy may cause systemic damage, and therefore need regulation, so that financial markets have "positive" externalities. Based on this, the financial crisis in the launch of the British "reform financial markets>> (Reforming Financial Markets White Paper and the <<European financial regulatory system reform>> (Reform of EU's SupervisoryFramework for Financial Services programs proposed changes in supervision of financial institutions as financial market activities in the interest of the structure, incentives are more actively maintain financial market stability. [2]

3 selling external effects in the financial crisis, "runs" the risk from the traditional extended to other areas of banking, the group sold a number of actions will result in the loss of investors' interests. This "low-cost sales of external effects," and also regulation of financial services to one of the main. [1] (P54

Regulation is a "double-edged sword" in the range of needs must be fully covered, you can not leave loopholes, and too much, misconduct, omission, "overlap" and contradictory regulation would harm the financial freedom, order and security. So, the financial boundaries and degree lie? on the market and the regulation of the general relationship, where the market can adjust, society can self-government, no government regulation, and vice versa requires regulation and the regulation well. Financial is a high monitoring coverage of the Industry, So the financial industry, market and government relations, is not whether to control the main, but rather on the financial regulation or supervision should be based on market mechanisms as far as possible, in the regulation of relaxation and to optimize the dynamic balance between the pursuit, taking into account the anti- disadvantages and Hennessy.

Financial and regulatory nature of the rule of Law The rule of Law is not only legislation, but in complex financial systems, enterprise autonomy and compliance activities, based on its behavior and external legal and ethical requirements of convergence, the regulator is In the interests do not conflict under the premise, based on the separation of powers, the appropriate role, within the mandate of the general freedom and discretion can be expected to also be a matter of accountability in the eclectic and after the Responsibility to provide for the overall interests of the public-cum- requirements to achieve effective regulation.

Third, focus on the financial sector or the separate supervision of reflection

A country's choice of model of financial regulation and financial supervision system, change the path depends on its history and its economic, financial operations and external environment. A reasonable and effective financial regulatory approach should not only respect for tradition and the actual situation, and in line with financial internal Laws, both technically feasible and cost acceptable, but also consider future trends, with some flexibility.

The financial crisis, financial freedom and deregulation mainstream financial should be mixed, concentrated control is considered to be the trend. Has advocated China's "financial regulatory agencies should be merged" to form a "centralized monitoring system" was still prevalent. (Note: See <<Peng Dragon: China may step to establish a unified financial regulatory system>>, http://www.hqcx.net/news/content.jsp id = 1719317 (Global Financial News Network, 2010 August 11 visit, while from a practical effect, of this popular saying worthy of reflection, such as the idea of ​​centralized control is far from satisfactory as, in fact reflects the separate regulatory requirements of the financial objective, there's not a serious problem.

(A) the background and focus on regulatory issues

Concentration of the reasons is under financial liberalization, hoping to achieve effective under the conditions of mixed financial regulation. A centralized regulatory body dynamics are: First, that, can well be accurate for the overall risk evaluation and control, and the second, saving the cost of regulation, and its three sub-sector regulatory problem is that conflicts exist between regulatory agencies, but also prone to cause omission, centralized regulatory powers and responsibilities will be rolled into one, can not shirk, shirk the reason regulatory responsibility, the implementation of the four, under the supervision of the sub-sector, the equal status of various regulatory agencies, regulatory cooperation in information exchange and the lack of sufficient power and effective restraint, there is no centralized control and coordination of risk communication.

However, centralized control does not reach the ideal state outlined the theory, even more problems. First, focus on the "formal" financial integration reforms rarely smooth, successful, on the contrary the sub-sector under the supervision of the extraordinary configuration control is not only preserved, but also effectively play a role In 2002 the German Financial Supervisory Authority was established (Bafin is a good case, the agency's internal organization is still in accordance with banking, insurance and securities were established, not only monitoring methods and Compared with the previous methods have not changed much, and few internal communications staff, office space did not even together together, turn a blind eye to the many financial fraud, the media ridicule of the world's most redundant organizations (Note: See <<< Deutsche Bank Law "and the German Financial Supervisory Authority (Bafin permissions>>, http://www.germanyfinance.cn/ns_detail.phpid=2411&nwmenuid=44&cpath=0001:&catid=1 (German Financial Network, April 30, 2010 visit .. Japan's financial reform before the regulatory Financial Services Agency to establish a centralized and unified <<Financial Instruments and Exchange Law>> is not to the shape of the gods, in fact, was of monitoring. The main reason is that the financial professional , industry classification and complexity, difficult to control and play essentially the integration advantages of centralized control.

Second, the regulatory target of contradictions. To banking supervision and securities regulatory objectives, for example, their contradictions like "doctors and police," the difference. Banking regulators are "financial doctor", the securities regulatory authorities such as "financial police", both in access, internal control, information disclosure rules, the risk early warning is almost impossible to reconcile the differences (Note: See <<financial regulatory body of>>, http://www.hudong.com/wiki/% E9% 87% 91% E8% 9E% 8D% E7% 9B% 91% E7% AE% A1% E4% B8% 80% E4% BD % 93% E5% 8C% 96 (interactive one hundred dot com, April 30, 2010 visit, interest rates, exchange rates and the shift in the stock market, trying to rule by a single regulatory body to be taken into account, it is very difficult, but not more likely to reconcile the real game is unreasonable. For this reason, regulatory agencies and departments focus on difficult to reach a consensus on the regulation, guidelines, policies, lack of common understanding, and implementing them difficult. conflicting regulatory objectives worst results regulatory exclusion, which is a strong sector will overwhelm vulnerable sectors in many transition countries, which is often manifested in the banking authorities to establish exclusive authority, securities regulation and insurance regulation become affiliated departments [3], capital market development is therefore subject to obstacles.

The third is a simple technical adjustment can not adapt to the systemic financial supervision requirements of financial regulators in many countries the main problem is the regulatory target is unclear, unclear responsibilities [4] This "clear", "unknown" and does not may be eliminated by merging institutions, will only be aggravated due to merge, the original establishment of a centralized regulatory authority that a major benefit is to strengthen the responsibility of actually increasing as unclear responsibilities and increased monitoring of moral hazard from the Japanese experience , the FSA's power is too concentrated, regulators subject to political constraints, there has been lack of supervision and regulatory vacuum conditions, so concentrated on the surface Jianguan realize the financial industry a unified, consolidated supervision, but the focus 本身 and can not eliminate the separate supervision drawbacks.

In the final analysis, focused on monitoring the embarrassment suffered by the mixed nature of the decision. Mixed difficult to curb moral hazard, which is the United States through 1933 <<Glass - Steagall Act>> (Glass- Steagall Act, first separate operation system one of the reasons in the mixed, the Firm Canadian investment bank model or the financial holding company model led to the formation of financial risk more twists and turns, hidden, more complex and difficult to identify them, but once a crisis , but also has spread fast and reach a wide influence on the characteristics of a great Financial institutions business was considered to be complex and diverse financial institutions, risk diversification, an important means of synergies, but denied that the sub-prime crisis presumed logic of financial products 'innovation' will be the local real estate and bank credit risk spread to a country's overall capital markets and global financial markets for mixed financial institutions, must respond to each business competition from all sides of its own resources, planning and management have put forward a very high demand for financial regulators, the mixed mode of business infiltrated each other, very complex financial products, financial risk monitoring and prevention difficult, prone to vulnerabilities, so a simple mix industry is not able to spread the risk, the key is how to control the risk and spread of the series, a suitable and healthy development of the financial sector's financial system requires a relatively conservative business and investment environment, as well as effective and reliable monitoring, separate management and separate regulatory model is to have this effect.

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(Two pairs of sub-sector regulators re-examine the

Wave of liberalization in the people's criticism of separate operation, is it difficult for different financial services to compete on the scale of financial innovation and inhibit, for example, difficult to use commercial banks, securities companies the advantages of financial strength and networks of commercial banks Securities business can not help to promote the development of its banking business, but the lack of sub-operators is precisely the advantage of playing its foundation is based on separate business model business restrictions on financial institutions to enable financial institutions to abide by our part, to the doing business specializing in fine lines and stronger in order to control the risk in a business area, to prevent the risk of transmission, development of financial institutions so as to provide a stable and fair market environment.

Accordingly, the financial sub-sector is reflected in the regulatory advantages: First, the regulatory agencies carry out their duties with professional advantage, and responsibility will help to achieve regulatory objectives, regulatory efficiency. Second, different regulatory regime, though with different goals, but between work and performance in all aspects, but there are competitive pressures, [5] which can promote innovation in financial supervision and improve efficiency. Implementation of universal banking in 1999, the United States, its sub-sector regulatory system is no big change is the "two-long supervision" (Note: "double" refers to the federal and state lines, federal regulators in the Federal Register of banks, state supervision of the state registration of banks and insurance companies. "bull" refers to the complex financial regulatory bodies such as the banking industry by the Comptroller of the Currency Board, the Federal Reserve Board, Federal Deposit Insurance Corporation and other three federal regulatory agencies, states with bank regulatory agencies, securities industry by the federal Securities and Exchange Commission (SEC regulation, insurance regulation by the state Department of Insurance (SIC regulation, and the establishment of National Association of Insurance Supervisors (NAIC, through long-term development, the nation's insurance regulatory standards the basic unity of the year 1999 has allowed universal banking, the Fed was given the mandate of monitoring the financial holding company, financial holding company engaged in various financial services according to the former regime, "long" regulation. See Zanghui Ping "the history of the U.S. financial regulatory system evolution >>, Economic Management Press, 2007, the first 57-59 pages of this major reform to address the financial crisis in the financial regulatory system established, mainly in the long supervision over the establishment of the Financial Stability Oversight Committee as the overall coordinating body, the main responsibility is to identify and guard against systemic risk, there is no physical custody, in this framework, the Comptroller of the Currency Board and the Comptroller of the merger savings institutions, responsible for the supervision of national banking institutions, the Federal Reserve and Federal Deposit Insurance Corporation's regulatory functions had changed little the other also in the establishment of the Federal Reserve Consumer Finance Protection Agency, from the perspective of consumer protection of various types of bank regulatory and non-bank institutions, the SEC continues as a strong independent regulator to regulate the securities and trading, Under the Act will also set up a new Federal Insurance Department (FIO. (Note: see Qin F: "to financial stability-oriented U.S. financial regulatory reform>>, http://finance.sina.com.cn/leadership/ mroll/20100817/16068497542.shtml (Sina Finance, August 17, 2010 visit to be seen, after the U.S. financial crisis, the reform idea is to strengthen the supervision of, respectively, make up regulatory loopholes to control systemic risks that the development of China's financial industry and the financial regulatory system, lack of enlightenment values.

Overall, of monitoring because of their professional responsibilities clearly, and performance and universal, cross-moderate concentration of mixed business does not necessarily mean regulation is reasonable. For the lack of separate supervision, can enhance the regulatory powers of the co-ordination, to establish a separate supervision on the basis of coordination and cooperation mode of monitoring.

Fourth, the status quo of China's financial supervision and regulation should be separate probability

Practice is the best teacher, as it was generally agreed that the corporate profit and exchange its just a low-level, the transition to membership in the Exchange organization behind the exchange, and the Asian financial crisis exposed The problem is precisely that, because of membership Exchange closed, self-interest, etc., but as to the progress of corporate transactions, correct understanding of the financial sub-sector or focus on the merits of regulation, abandon preconceived "centralized control is the trend, sub- supervision outdated, should be out "concept, can be based on the current, clear direction, thinking and behavior" do not toss', which will help China's financial sector stable, healthy development.

China's financial industry and financial institutions, the management level is not high, with only a few international standards roughly ten years time the financial institutions, corporate governance, internal control and compliance structure, risk management and so are not perfect . the regulatory agencies, is basically in the "doing" to securities regulation, for example, with the SEC skilled seasoned, vigorous and resolute, the Chinese Securities Regulatory Commission as good as "insignificant", is quite different .1990 , China established the first specialized financial regulators China Securities Regulatory Commission, established in 1998 China Insurance Regulatory Commission (CIRC, until 2003 the development of "Banking Regulatory Law>> and modify <<Bank of China Law >> establishment of the China Banking Regulatory Commission (CBRC, the regulation of financial institutions only from the central bank to separate the functions. three specialized financial regulatory agencies grew out of People's Bank of China, professional and full coverage of financial regulation had just entered the on the right track, as Cheng said, the merger of financial regulators, in fact, "turning back." (Note: See <<State Council reform will start off the financial sector will remain separate supervision>>, http://www .ce.cn/cysc/zjxw/200803/11/t20080311_14787709.shtml (China Economic Net, April 1, 2010 visit. More importantly, financial institutions need to operate in separate firewall protection and professional financial regulators guidance, supervision, continuous development, innovation and self-improvement the U.S. government pushing Obama's financial regulatory reform law with the same purpose.

Therefore, the level of financial supervision in China to improve the key is to create a more professional, fair, and efficient CBRC, CSRC, CIRC and the central bank, to improve regulatory effectiveness to compensate for communication, sharing and regulatory co-ordination of weak links, China established in 2004, the central bank may be invited to the Ministry of Finance and other ministries to participate in the CBRC, CSRC and CIRC three will be "joint monitoring mechanism." If the mechanism can not be established with the U.S. Financial Stability Oversight compared to its functions, then the State Department and the Central Bank of the three co-ordination, guidance and supervision capacity and intensity, the initiative and effectiveness, should be well above the course, China's financial supervision is mainly aimed at individual enterprise, and risk behavior in order to prevent systemic risk, learn from the U.S. financial stability oversight board, in building systems can have two options: First, the establishment of an Anti-Monopoly Committee considerable financial control monitoring committee, as the State Department An inter-ministerial coordinating body of procedure, by the regulatory bodies and relevant ministries responsible members, to coordinate and focus to identify, prevent systemic risk, is responsible for evaluating the overall financial situation, develop the financial regulatory standards and policies, to issue regulations and guides, guidance and supervision of the organization and coordination of financial regulation. The second is to strengthen central bank functions of the People's Bank of China detached in silver, card, insurance regulators three specific co-ordination of financial supervision and coordination functions, identify their guard against financial systemic risk responsibilities. in accordance with existing law, namely People's Bank of China has to develop and implement monetary policy, payment and settlement systems to maintain normal operation and maintenance of financial stability functions of the duties of its prudent macroeconomic management is a matter of course.

From the above, whether or supervision in accordance with the decision base determines the superstructure of the theory of market structure, sub-sector regulators are necessary and reasonable. Sub-sector regulatory and competitive advantages of specialization in addition to the aforementioned kinetic energy, but also has the following two advantages.

First, separate supervision will help regulatory agencies from political, in the monitoring of the professional judgments based on the independent regulatory agencies in the early 20th century, the advent of the reason is hoped that through independent specialized agency of the government and politics, based on the position and professional literacy in their daily law enforcement, not the current government and political influence, while the financial sector on the economy in view of the depth of penetration and coverage of unprecedented scope, focus on monitoring the need for a "super" regulator. This will inevitably be affected by political institutions around the bureaucracy, manipulation by political forces and interest groups struggle, or is subject to populist, much easier for regulators to be "captured" and its "captive" caused the financial regulation general paralysis. centralized control, it will weaken the sub-sector regulatory agency under the conditions of competition between different regulatory mechanisms to eliminate the incentives and constraints brought about by competition, thereby reducing the regulatory performance. to draw upon central banks and competition law enforcement agencies, whether they have "independence", the paper is not provided by law or determined by its formal independence, but on whether there is to ensure that their professional judgments based on the various mechanisms in the financial sub-sector or the focus of regulatory issues , which must be aware of.

Second, separate supervision and accountability (accountibility) extensive development of public and private sector in recent years the trend is consistent. According to their business and financial targets to be monitored, regulators target is diverse, the pursuit of goals that may exist between the various conflict only in the regulatory roles clearly established on the basis of, by and between the different regulators and other regulatory authorities and coordination between the game, infinitely close to the regulatory objectives in order to reach the expected result would be a variety of regulatory functions to a single financial institution, the division of powers and its internal distribution is difficult to form a real role to play in place of the accountability system also requires regulators to perform their duties in the process of accountability for its eclectic way (answerability, Where regulators conflict of interest, the role of dislocation, sluggishness negligence, or decision-making mistakes, misconduct can not stand accountable, should the law to bear the adverse consequences (liability. and concentrated control will inevitably become the "iron rice bowl", in a pursuit of different objectives, monitoring operations complex, diverse and large organizations, various external accountability "and every other boots scratching", and not directly on the regulator, accountability is difficult to play its natural role in monitoring how effective will be suspect. for regulators to pursue different goals difficult to form sufficient incentives and constraints, but also for "half-hearted" to create the conditions for their mutual professional judgments based on their respective constraints, coordination, cooperation and have lost the basis.

Separate supervision of the regulatory objectives with a simple, focused features, which fit naturally with the accountability system is conducive to a supervisory role to play, easy to implement supervision and responsibility, and accountability can be strengthened through regulatory competition, improve regulatory effectiveness.

Separate supervision itself, there are also room for improvement in the regulatory determination of the object, a single agency should abandon the standard, plus product standards, silver, license, insurance, respectively, for the three kinds of supervision in addition to banking, securities, insurance companies, but also should respectively, for any financial institution operating the banking, securities, insurance products, such as banking or insurance products debt securities, should be led by China Insurance Regulatory Commission and the supervision of the Commission so that to maximize the role of regulatory agencies and rationalization Setting the right to justice, co-ordination also get a good foundation.

In summary, sub-sector regulatory cooperation is not only our country ought to choose, but also has universal significance, representing the basic direction of the financial regulatory reform. Accordingly, the financial sector should be based on the principle of separate operation, taking into account the mixed business and consumer market demands, under the supervision of the effective development of a healthy run.





Notes:
[1] [U.S.] 埃里克佛鲁博 Dayton, [Germany] Rudolf Ruiqie Te. New Institutional Economics [M]. Shanghai: Joint Publishing, 2006.

[2] Wu and Mao. Financial regulatory reform, the basis of academic thinking, 21st Century Business Herald ,2009 -12-31.

[3] [United States] Leo M · Tillman. The financial theory of evolution [M]. Beijing: Mechanical Industry Press, 2009:7.

[4] Cao Fengqi editor of Challenge - High-Level Forum Beijing University of Economics and Finance wonderful speech [M]. Beijing: Enterprise Management Press, 2008:148.

[5] Zhu banner. Financial Law [M]. Beijing: China Renmin University Press, 2007:118.

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