Development Plan For Financial Market And Financial System: New Top-Level Design

The idea of global financial regulation and governance is in the clouds before and after the subprime crisis.

Since 1970s, financial liberalization, such as "financial repression" and "financial deepening" have been regarded as the criterion of economic and financial policy leaders.

The trend of financial liberalization has flourished to the first ten years of twenty-first Century, and has reached the peak of prosperity with the economic prosperity of Europe and the United States.

However, the subprime mortgage crisis has triggered criticism of neoliberalism. It is believed that the financial crisis is caused by market failure and government failure. Therefore, it is necessary to further promote marketization and appropriate government intervention.

The global economic structure in the post crisis era further strengthens the integration of market and government and drives the trend of economic liberalization to shrink.

Influenced by the combined mode of thinking of liberalism and government intervention, the financial supervision in the United States has gradually shifted from the "double long" functional regulatory mode to the regulatory model based on financial stability and so on, trying to build three major regulatory pillars, namely, market stability supervision, prudent financial supervision and supervision of business conduct.

Financial regulatory objectives are more clear.

In 1970s, with the advent of the financial innovation boom, the deregulation of the financial market was high. The market efficiency instead of financial security became the regulatory target, but it also led to large financial fluctuations. In 1987, the 1295 savings and loan associations closed or received assistance from the savings and loan crisis, and the financial regulatory authorities had to reexamine the regulatory system.

In the late 80s and early 90s, the financial supervision in the United States entered a period of rational reform. The goal of supervision was shifted from efficiency priority to safety and efficiency.

However, under the influence of liberalism, the financial regulation of the United States once again opened the easing cycle before and after twenty-first Century. The goal of financial regulation has been returned from a prudential regulation to a regulatory target of efficiency priority.

The iconic events at this stage include the Financial Services Modernization Act of 1999, the Commodity Futures Modernization Act of 2000 and the financial services control relaxation Act 2006.

After the subprime crisis, on the basis of summing up the causes and disastrous effects of the crisis, there are two major pillars of financial regulation reform. First, we must prevent the failure of super financial institutions which are too big to fail and lead to systemic crises. The new regulatory framework must guard against systemic financial risks.

The second is to protect consumers from financial fraud, effectively prevent the recurrence of credit risk crisis due to over borrowing, and establish a consumer protection mechanism.

Under the background of continuous reform of financial regulation, the regulatory objectives are gradually defined in three aspects: ensuring the security and stability of the financial system, promoting the internal efficiency and competition of financial institutions, and protecting consumers.

Financial legislation is constantly innovating.

The 1933 Glass slagel law, the 1999 modern law of financial services, the three milestone law of the Dodd Frank act of 2010, can comprehensively sort out the thread of American financial regulation from concept to specific policy since the great depression.

The Frank law has become the cornerstone of financial supervision after the crisis. Its core contents include strengthening the protection of financial consumers, setting up a new consumer financial protection bureau within the Federal Reserve, reorganizing regulatory bodies and regulatory functions to solve systemic risk problems, establishing a financial stability supervision committee, and preventing financial institutions that are of systemic importance "too big to fail". Among them, the most famous "Volcker rules" restrict the investment of banks, non bank financial institutions in self trading, hedge funds and private equity funds, strengthen supervision over the OTC derivatives market, strengthen supervision over the remuneration of financial executives, shareholders have a say in the issue of remuneration, are allowed to vote on management pay and "golden parachute" plan, strengthen investor protection, and establish a new regulatory coordination mechanism. Among them, Dodd

Strengthening federal regulation of financial institutions.

Before the financial crisis, the federal government shared financial regulatory power with all States, forming a "two track and multi industry system".

After the crisis, according to the Dodd Frank act, the functions of federal agencies were strengthened, especially the scope of supervision by the Federal Reserve.

The central position of the Federal Reserve in systemic risk regulation has been established. The scope of supervision of the Federal Reserve has expanded from Banking Holding Company to non bank financial institutions such as hedge funds and insurance companies. The Federal Reserve's ability and power in strengthening system payment, trading and liquidation have been further expanded.

The regulation of Investment Bank Holding Company is exclusively exercised by the Federal Reserve to replace the joint organ of the securities and Exchange Commission.

An independent consumer financial protection agency has been set up within the Federal Reserve, and the Federal Reserve is under the supervision of Congress.

The financial stability Regulatory Commission was set up to monitor and deal with large-scale joint ventures and their products and activities before threatening economic stability.

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The chairman of the financial stability committee is chaired by the Minister of finance, including the Federal Reserve, the securities and Exchange Commission, the Commodity Futures Trading Commission, the monetary oversight agency, the Federal Deposit Insurance Corporation and the Federal Housing Finance Agency.

At the same time, the financial research office is set up within the Ministry of finance to support the work of the financial stability Committee.

Trump, the new US president, signed the executive order in February 2017, took measures to adjust the Dodd Frank law to reduce financial regulation. During the election campaign, he promised to abolish the Dodd Frank law. But at present, the probability is small. The more feasible strategy is to amend some financial regulations to weaken the bill.

Financial liberalization is advancing too fast.

China's financial market has undergone a wave of financial liberalization similar to that of the global financial market in 1970s.

The development of financial innovation, financial technology and financial technology has promoted the outbreak of Inclusive Finance. The trend of the shadow banking system has been brought about by the supervision of separate institutions and the mixed operation of financial functions.

With the rapid development of financial innovation and comprehensive operation, asset expansion is accompanied by financial product innovation and business model innovation under the spillover effects of bank savings, insurance Asset Management Co, securities companies, trust companies, fund companies and fund subsidiaries.

By the end of 3 in 2017, we did not consider cross holding factors. The size of financial management products of various financial institutions exceeded 100 trillion yuan.

At the same time, although financial regulation has been constantly innovating, the market innovation has gone faster and farther, and financial regulation has lagged behind.

Financial liberalization has gone too fast and financial regulation has lagged behind in five aspects.

First, the management of financial products is too extensive. Many legal relationships have not been developed in a large-scale way, making financial products not a tool for serving the real economy, but rather a looting of enterprise assets.

The two is the Internet Finance and inclusive finance as a pretext, many unlicensed financial models rise.

Internet banking as a representative of the third party payment companies, P2P companies, consumer loan companies, Internet asset securitization companies and other business forms contain a large number of private funds into the financial sector.

Various local exchanges, including stock trading, commodity spot, futures and creditor's rights trading platforms, have emerged in large numbers. These informal finance have increased credit risk and liquidity risk.

Three, the tendency of collectivization and platform orientation of financial institutions has been gradually strengthened, and the governance structure of financial Institutional Firms has not completely adapted to the new situation.

The relaxation of control has attracted industrial capital to increase capital investment in the financial industry. The first batch of five private banks have been set up. The capital and private capital of Hong Kong and Macau have started large-scale investment in the establishment of securities companies. Recently, 11 securities companies are applying for establishment. The establishment of insurance companies is even more popular. At present, nearly 200 companies are queuing up to apply for licences at the CIRC. Under the tide of Internet Finance and financial technology, the financial industry has gained the favor of manufacturing industries and large entity companies. Jingdong finance, ant gold clothing, Suning finance and Wanda finance have invested heavily in the financial industry, from the industrial chain to the financial chain.

The platform system is mainly reflected in some small and medium-sized private enterprise financial institutions. In order to promote the business team system and commission system, the incentive mechanism is prominent and the constraint mechanism is relatively small.

Typical problems such as "radish chapter" at the end of 2016, fully illustrate the problems of financial institutions' re development, heavy profits, neglect of corporate governance structure and lack of compliance with wind control.

Four, the marketization of interest rates has brought about a wave of financial disintermediation.

And the rise of SPV.

The rapid development of financial innovation and comprehensive operation promotes the pformation of large institutions to the direct financing market from the interest rate liberalization of the assets side, pforming savings deposits from liabilities into financial products, and accelerating the deposit diversion by interbank deposits.

With the spillover effects of bank savings, insurance companies, Asset Management Co, securities companies, trust companies, fund companies and fund subsidiaries, under the separate supervision system, regulatory arbitrage and regulatory vacuum behavior are generated, and asset expansion is accompanied by financial product innovation and business model innovation.

The five is the high leverage ratio.

Despite a sharp deleveraging in 2013 and 2015-2016 years of government demand for "three to one drop and one subsidy", the overall leverage ratio of China's economy is still soaring.

A new macro Prudential Financial Supervision System

Financial market innovation always takes place before supervision. Especially in the financial market and financial regulation, it is facing structural pformation. Therefore, the strengthening of the current financial supervision should mainly be reflected in the revision of excessive liberalization, a patch for the separate supervision mode and a new macro Prudential Financial supervision system.

At present, China's financial supervision legal system is not perfect, there are both blank areas and legal norms.

The laws and regulations that constitute the legal system of China's financial supervision have been established earlier, mainly based on the traditional financial business norms, which can not be followed up in time in the face of the new problems arising in the financial market. As a result, the proportion of departmental rules and regulations is much higher than that of laws and regulations.

In addition, the "one line, three sessions" financial separation supervision mode has loopholes under the impact of comprehensive operation, mixed operation and shadow banking of financial institutions, and the coordination mechanism between the regulatory departments lacks a more formal system guarantee.

Institutional regulation is facing equal pformation to institutional and functional supervision. However, under the separate supervision mode, there is a blank in regulatory coordination, resulting in arbitrage.

Macro Prudential and micro prudential supervision is lagging behind.

Macro prudential supervision has two dimensions. One is the macro prudential supervision in the time dimension. The purpose is to mitigate the instability of financial market by mitigating the systemic risk of risk factors and pro cyclical.

For example, we should increase the risk requirements of capital and liquidity, and establish a counter cyclical capital buffer mechanism.

The two is the macro Prudential Regulation on the cross section, focusing on the relevance of systemic importance and financial institutions and financial systems.

At present, the domestic macro prudential supervision has been implemented late and the regulatory structure is single. It includes only banks that have not yet incorporated more important insurance companies, securities companies, trust companies and other financial institutions. At present, there is no road map and plan to solve the problem of "too big to fail".

Micro prudential supervision, including the corporate governance structure of financial institutions, financial infrastructure such as the unification of internal and external rating standards, the unification of trusteeship settlement and settlement, financial and tax standards, consumer protection and so on, needs to be perfected.

In particular, the problems existing in the corporate governance of financial institutions are relatively large, which are mainly manifested in the agency entrusted problems of state-owned financial institutions, the moral hazard of private financial institutions, the actual controller of private financial institutions, the collectivization of finance, the subject of non legal entities and the legal positioning of SPV.

Therefore, financial regulation is necessary to enter the active period.

On the one hand, financial regulation has entered a "serious" state. It is necessary to correct the situation of excessive liberalization as soon as possible and accelerate the repair of loopholes in supervision.

On the other hand, in view of the latest development of the financial market and financial system, it is necessary to make top-level design adjustment and planning on the regulatory system.

Specifically, it is imperative to unify the regulatory objectives as soon as possible, and establish economic system security, financial institutions' health and consumer protection as a long-term regulatory target as soon as possible.

We should clarify the main body of supervision, improve the regulatory system, set up macro prudential supervision institutions and micro prudential regulatory agencies, and implement institutional oversight and functional supervision.

We should further improve the relevant laws and regulations on financial supervision, strengthen the supervision of financial institutions that are too big to fail, expand and improve the regulatory system of systemic risk regulatory agencies, expand the scope of systemic important financial institutions, bring investment banks and insurance companies into systematic financial supervision, and implement macro prudential policies.

Strengthen financial consumer protection.

We will further improve the governance structure of financial Institutional Firms.

We should raise the importance of corporate governance structure to a higher level, and explore the incentive compatibility mechanism design of state-owned enterprise ownership and management incentive mechanism.

We will further push forward the rigid payment expectations of financial institutions. On the one hand, we should provide adequate capital reserves for related businesses, and on the other hand, we should strengthen investor expectations and set up buyers' conceit.

It is necessary to unify the capital management of financial institutions and promote the full implementation of the Basel agreement in banks, insurance and investment banks.

A unified regulatory approach to asset management business should be launched as soon as possible to form a unified standard.

It is necessary to unify the liabilities standard of financial interbank, capital and leverage, and reduce systemic risk.

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