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Development Status and Risk Analysis of Financial Holding Company

Author: CaiJingLi From: www.yourpaper.net Posted: 2009-12-17 10:02:34 Read:
[Abstract] With the development of world economic integration and financial globalization, Conglomerates become the trend of the times. Since the 1980s, the global financial services industry into a comprehensive structural integration, the traditional boundaries between different financial institutions are fuzzy, centralized, all-powerful and globalization of financial institutions to become a common phenomenon. Commercial banks, securities firms and insurance companies and other financial institutions continued integration, there has been a wave of mergers and acquisitions wave continues today, the financial holding company is the financial institutional change process to provide banking, securities, insurance and other financial services and products the form of financial organizations. States after a series of financial reforms to promote the development of the financial holding company to promote capital flows around the world and the financial integration process, greatly enhance the efficiency of the country's financial. It can be predicted that the financial holding company form of organization will play an increasingly important role in the financial development in the future. China's accession to the World Trade Organization (WTO), the opening up of the financial sector is increasing. The financial holding company's research has important implications for the future development of China's financial industry.
[Keywords] risk prevention and development of financial holding companies

One, the development of China's financial holding company status

Financial holding company between the universal banking system is entirely mixed operation mode with completely separate operation mode between the sub-sector of the financial mixed operation with various subsidiaries of the Group is operating organic combination, thus both the mixed operation separate operation characteristics. It is also China's financial industry in the future development direction.
(A) the financial holding company's advantage
1. Advantage of economies of scale and economies of scope. Financial holding company fixed costs can be apportioned to the broader business use of existing branches and sales channels to carry out a new variety of businesses.
Business diversification advantage. The most fundamental benefit of the financial holding company is still in its meet market demand, and the convenience of customers. Financial holding company be able to provide our clients with the very convenient "one-stop financial services" and to adapt to the Internet age requirements online financial services.
Risk diversification advantages. Financial diversified financial services holding company with risk diversification. The financier's motto is "Do not put all their eggs in one basket". Financial holding company to make up for with the proceeds of another business, thereby enhancing the financial holding company's overall ability to resist risks.
Financial innovation advantage. Another benefit brought about by the financial holding company to financial institutions, financial innovation, it makes the various elements within the finance department to be reassembled and spawned a new financial business, to provide more and better services for customers.
(B) of the development of the financial holding company
Pilot reform started earlier financial holding company. China Everbright Group was established in the early 1990s, with China Everbright Bank, Everbright Securities, Everbright International Trust and three financial institutions, and also holds a 19% stake in Shenyin Securities. The end of 2002, the State Council has approved, CITIC Holdings LLC to become a financial holding company in the true sense.
Three major state-owned commercial banks to set up wholly-owned or joint-venture investment bank overseas, changes in the financial holding group. The three major state-owned commercial banks to set up subsidiaries involved in the investment banking business to expand business areas, reducing the risk of commercial banks.
Local governments running financial holding company. Such as organized by the Guangdong provincial government of Guangdong International Trust and Investment Corporation, to the 1990s, has developed into a large financial group, the investment involved in over 3000 projects into dozens of areas of finance, securities, trade and industrial production, Group's assets reach more than 200 billion yuan.
Industrial capital holding banks, securities and other financial institutions in the stock market to increase their investment in enterprise groups in recent years. Such as Yunnan Hongta Group, while maintaining the main industry, constantly capital injected into the financial field. In addition, there are investment holding Baosteel, Daqing Petroleum, Shandong Electric Power, Haier, New Hope Group, the joint-stock commercial banks.

Second, the financial holding company in China risk

Any of the economic system is a "double-edged sword, the financial holding company is no exception. Financial holding company contact through the capital, institutions and business integration, to provide all aspects of financial services for the enterprise, has the advantage of traditional financial institutions, strengthen the currency market, the cooperation between the capital market and the insurance market, communication and integration, and promote the improvement of economic and social benefits. However, the financial holding company exist within a complex organizational structure and relationship network, as well as the innovative financial services, in addition to the general risks to face various financial businesses, but also the face by the holding company controlling organizational structure "special risk".
1 capital assessment more difficult to cause the risk of inadequate capital. Cross-shareholdings will bring capital to double counting of capital adequacy; holding company to issue bonds to finance as a capital investment in a subsidiary, so that the entire capital of Holdings is insufficient to affect the security of the entire Holdings; same time, the increase in complex shareholding relationship rate the difficulty of management, which in turn contributed to the financial holding company through cross-shareholdings "inflated" the motives of the capital, the holding company through a complex cross holdings it possible to evade regulatory capital adequacy ratio of the regulatory authorities.
Risk of insider trading brought to pass. Financial holding company to achieve synergies through business cooperation between the various subsidiaries, insider trading is inevitable. The internal Fair to increase the holding company and subsidiary capital funds interdependence may result in risk transfer, risk and risk of the financial holding company handling complicated, making their operations.
The complex structure of the management risks. The financial holding company affiliates cross-shareholdings lead to complicated corporate structure, the Group's large-scale and multinational operations led to complicated internal management department level, the Group's business involves a variety of financial services operating complicated. This situation, on the one hand, exacerbated by information asymmetry, transparency issues become more prominent, on the other hand, poses a challenge to managers and regulators, may cause the Group directors, senior management and regulators to manage risk and regulatory mistakes. In addition, due to the Group's cross-border, cross-industry business, even while operating the financial and non-financial businesses, which in turn brought two outstanding problems. First, the financial holding company subsidiary accounting system different, is not conducive to the Group's management and regulators timely and accurate understanding of its financial and accounting information, increasing the difficulty of control and supervision; Second, is likely to result in the blind spot monitoring of financial Group involved in the supervision of the regulatory agencies in a number of industries, regulatory purposes, methods, and focus of these regulatory bodies of the same, is not conducive to mutual understanding, it is difficult harmonization action.
Holding company within the conflict of interest easily lead to the transfer of risk to the bank. Different business units or subsidiaries of the financial holding company within the commercial banks, securities companies, insurance companies, trust companies and investment funds in the business integration process will occur some interest, resulting in a conflict of interest. Deposits from the public in various financial institutions, banks, bear the settlement payment, once the risk, the government is often out of the social stability and safeguard the needs of the payment system, will rescue. This rescue banks tend to lead to the motivation for the transfer of risk to the bank financial holding company will appear. Third, the financial holding company in China to guard against the risk of suggestions

Establish a financial holding company's market entry and exit mechanisms
Should determine market access standards and requirements, such as minimum capital Total capital adequacy ratio, capital mobility, governance structure and internal control. And the establishment of market exit mechanism specified financial holding company changes, restructuring and termination matters, exit procedures, make certain restrictions rescue behavior of the parent company, subsidiaries, and provides that when a subsidiary of crisis may bring disaster to the parent company or overseas subsidiaries acquisition of the local government should be bankruptcy.
2. Establish a sound regulatory system of the financial holding company's capital adequacy ratio
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