Financial institutions can strengthen their capital strength, strengthen the cooperation, communication and integration of money market, capital market and insurance market through merger and expansion and mixed operation, and promote the improvement of economic and social benefits. However, due to the complex organizational structure and relationship network and innovative financial business, financial holding companies will not only face the general risks of various financial businesses, but also face the "special risks" brought by the organizational structure of "holding company holding".
(1) System risk.
Risk transmission may amplify risks. Because customers generally treat the financial holding company as a whole, if there is a problem in one department, the risk will be passed on to other departments, which will damage the image, reputation and credit ability of the whole holding company and may eventually reduce the overall solvency and stability of the holding company.
Capital double counting greatly reduces the ability to resist risks. In order to maximize the efficiency of capital utilization, a financial holding company may use the same fund for many times between its parent company and its subsidiaries, but in fact, the "net" solvency or "consolidated" solvency of the holding company is far lower than the sum of the "nominal" solvency of its members. Repeated calculation of capital means that limited capital has to bear many times its own risks, which is a huge hidden danger.
Complex internal structure and a large number of related transactions make it impossible to accurately judge risks. The biggest problem of financial holding companies is internal related transactions, some of which are as high as hundreds of millions or even billions. Related party transactions may lead to risk transmission and make the difficulties in operation more complicated. The complexity of the internal structure and related party transactions of financial holding companies makes it difficult for investors, creditors and even senior managers to understand the authorization relationship and management responsibilities among company members, thus making it impossible to accurately judge and measure the overall risks of the company.
(2) The risk of opaque structure.
Avoid the risks brought by supervision. Driven by interests, as long as there are differences between different financial professional supervision systems, financial holding companies may adopt the behavior of evading supervision and establish an organization model with the least resistance, such as making financial institutions that are not supervised or have a low degree of supervision become the holding subject of the holding company. Both of these behaviors will make it more difficult for the regulatory authorities to supervise the relevant financial institutions, thus making risks hidden or directly leading to risks.
Internal loan risk. Loans to subsidiaries at all levels are an important way for parent companies to effectively control subsidiaries and implement the development strategy of holding companies. However, due to the complex structure of financial holding companies, it is difficult for lenders to grasp the purpose of loans, and it is also difficult for departments responsible for supervising these subsidiaries to accurately judge the source of funds.
The risk of opaque structure. The larger the financial holding company is, the more enterprises it participates in and the more complicated the relationship, the more difficult it is for the regulators to correctly judge the risks of financial institutions. This opaque organizational structure will first make the coordination and communication between various departments within the holding company more difficult, and it is impossible to give early warning at the beginning of the crisis, which will eventually lead to disastrous consequences.
(3) Risks caused by conflicts of interest within the holding company.
There are conflicting business goals. The interests of some subsidiaries in financial holding companies are essentially conflicting. For example, the main purpose of investors' deposit in the bank is to seek the security of financial assets, but if the holding company uses bank funds for securities trading in pursuit of high profits, it will violate investors' desire for security. Similarly, the fund manager in the holding company specializes in buying the shares of the affiliated enterprises of the holding company, regardless of its profitability and security.
The decision-making autonomy of company members is restricted. Due to security and other factors, the financial holding company may seize some power from the management of its subsidiaries, which may cause many restrictions on its operation and decision-making, thus bringing risks. Strengthen the supervision of financial holding companies
Facing the severe challenge of global financial competition and the rising trend of financial holding companies, we should set about establishing a perfect supervision system and risk supervision mechanism as soon as possible.
(1) Improve the supervision mechanism of financial holding companies.
Establish a regulatory concept based on functional supervision. Financial holding companies have broken the boundaries of separate operations, and it is difficult for different regulatory departments to accurately implement supervision. Therefore, the concept of functional supervision should be established. The concept of functional financial supervision was first put forward by robert merton of Harvard Business School. It refers to the supervision designed according to the basic functions of the financial system. The different businesses of financial institutions are supervised by professional management experts and corresponding management procedures. It can be coordinated across products, institutions and markets, and it is more continuous and consistent. China's financial system reform plan has taken this trend into account, and established the China Banking Regulatory Commission to supervise banks, securities companies and insurance companies respectively with the China Securities Regulatory Commission and China Insurance Regulatory Commission.
Establish a coordination mechanism between different regulatory agencies. Financial holding companies engaged in comprehensive financial business need to strengthen coordination and cooperation among various regulatory agencies. At present, China implements separate operations, so it is difficult for different regulatory agencies to cooperate and the information exchange between them may also be blocked. Therefore, it is necessary to establish an effective information sharing mechanism between cross-industry regulatory authorities. It is suggested to establish a supervision joint meeting system, with representatives of the "three meetings" forming a communication platform to avoid conflicts of supervision rules and regulations and coordinate their respective supervision measures for financial holding companies. At the same time, it is necessary to actively develop information sharing networks and corresponding information systems to better serve the supervision, save supervision costs and improve supervision efficiency.
Incorporate credit rating into the regulatory system. Under the current separate supervision system, it is impossible to monitor and systematically evaluate the operating conditions and risk degree of financial holding companies as a whole. It is suggested that the standardized national credit rating index system should be formally established as soon as possible by drawing lessons from the "camel rating system" in the United States, so as to monitor and evaluate the operating conditions and risk degree of financial holding companies as a whole.
(2) Improve the internal governance structure of financial holding companies.
Establish capital adequacy standards. The subsidiaries of financial holding companies engage in a large number of non-bank financial activities such as securities brokerage and insurance. And these activities should require higher capital ratio than banking activities. Therefore, we should formulate different capital standards for different types of financial holding companies, effectively reveal the main risks undertaken by financial groups, or find potential defects in the internal structure of financial groups.
Improve the corporate governance structure. China's Commercial Bank Law stipulates that commercial banks may not invest in non-bank institutions and enterprises in People's Republic of China (PRC), but it does not prohibit the combination of finance and industry and commerce in the form of holding companies. As a result, the forward-related ownership structures such as Everbright Group (financial holding industry and commerce) and the backward-related ownership structures such as Luneng Holding Shen Wei Securities, Cai Xiang Securities and Ying Da Trust (financial holding industry and commerce) have emerged. Whether the structure of China's financial holding company should be British-American "keeping a distance", Japanese-German "close combination", "price bank" or "relationship bank", and what rules and conditions are needed for the penetration of industrial capital into the financial sector must be made clear as soon as possible. In addition, we should also focus on the construction and implementation of the internal self-discipline mechanism of financial holding companies and their subsidiaries, because the internal control of financial institutions is the cornerstone of financial supervision, and only when financial institutions form strict internal control can external supervision play a role.
Control excessive risk concentration. China should clearly stipulate that diversified financial holding companies must report to the regulatory authorities the systems and policies of the holding companies to confirm, monitor and manage risk concentration, and each regulated subsidiary must meet the risk concentration limit set by professional regulatory agencies; When the credit risk exposure of the holding company to the counterparty or affiliated institution exceeds 15% of the holding company's capital, it must report to the regulatory authorities and explain the situation.
Increase the transparency of the holding company organization. Transparency is the core risk issue of diversified financial holding companies. The standardization of regulatory transparency mainly includes two aspects: on the one hand, it is necessary to gradually unify the regulatory standards for financial holding companies and other financial institutions to ensure fair competition; On the other hand, it is necessary to gradually unify the supervision standards for banks, securities and insurance institutions in financial holding companies, achieve unified and comprehensive supervision, and prevent loopholes. The second is to follow the principle of consolidated supervision and comprehensive evaluation. The supervision of financial holding companies should be divided and combined. While separately supervising the holding company and its subsidiaries, the supervisory department in charge of supervising the parent company shall conduct consolidated supervision of the holding company, and make a comprehensive assessment of its risks and management on this basis. This can avoid the capital adequacy ratio, asset-liability scale, profit level and net asset value of financial holding companies, reflect the overall operating risk and development ability of holding companies more truly, and be more conducive to risk prevention and control.
Prevent related party transactions. Preventing related party transactions is the focus of supervision of financial holding companies, so strict laws and regulations must be formulated. The parent company should be required to regularly disclose the changes in corporate governance structure and holding structure, regularly report all related transactions to the regulatory authorities, and track and monitor previous legal transactions. The parent company should be required to set up a "firewall" between its subsidiaries to strictly limit bad related party transactions, and related party transactions exceeding a certain amount must be subject to special examination by the regulatory authorities. It should also be stipulated that the parent company should take full responsibility for the accuracy of public information, and if necessary, it should be verified by the regulatory agency, which is much easier and more effective than directly entering the subsidiary to obtain information.
Establish a holding company assistance mechanism. Financial holding companies should become the "source of strength" of their affiliated banks, ready to provide additional capital in case of payment crisis. This can protect banks and help improve financial stability.