Refined Solutions to New and Difficult Legal Issues in Commercial Banks

Author: Zhu Liming
Publisher:
Publishing Date: 2006-07-01
Features: "How many things are ever urgent; the world turns, time presses." Since " вступление into the WTO," China's financial market has become increasingly internationalized, and the competition among commercial banks has also intensified. By the end of 2006, China was to fully open its market to foreign banks in accordance with its commitments under " вступление into the WTO." In the fierce market competition, banks have been constantly introducing new strategies and innovations, each exploring competitive "blue ocean" areas. However, this has also led to the gradual exposure and increasing manifestation of operational risks. Many financial institutions, in their pursuit of short-term business growth, have neglected the prevention and control of operational risks, plunging them into the "quagmire" of non-performing assets. The new Basel Agreement has classified operational risk as one of the three major risks alongside credit risk and market risk, incorporating it into the calculation and regulatory framework of risk capital, which has attracted widespread attention and discussion among international banks regarding operational risk. Operational risk covers a very broad scope, and legal risk is a significant component of it. How to accurately identify and effectively control legal risks in business has become a crucial task and challenge for commercial bank employees. Looking back at the path since its establishment, China Merchants Bank has achieved its current development and success because it has always adhered to the guiding principle of "coordinated development of efficiency, quality, and scale." While expanding its market and developing its business, it has effectively prevented and controlled risks, consistently promoting "governing the bank according to law" and compliant operations. We are fully aware that to achieve the goal of "creating a blue-chip stock and building a century-old China Merchants Bank," in addition to responding to the fierce competition in the financial market with the right development strategy and advanced management model, we must also focus on skillfully applying legal rules at the operational level and using legal tools to safeguard the bank's "blue ocean strategy." Only by consistently adhering to compliant operations can we truly ensure the coordinated development of the bank's efficiency, quality, and scale. Therefore, compliant operations are of great significance to the sustainable development of China Merchants Bank and other commercial banks, being an inherent requirement for their stable operations. Compliant operations also need to be integrated throughout the entire process of financial innovation. In the various financial innovations of commercial banks, many businesses lack existing regulations and foundations. However, this does not mean that there is no need for compliance; on the contrary, in such cases, it is even more important to pay attention to the control and prevention of legal risks. The bank's business and legal personnel must study the legislative intent and regulatory standards according to laws and regulations, and carry out business innovation in line with the relevant legislative spirit and regulatory requirements. This further tests the bank's level of compliant operations. Against this backdrop, it is timely for our Legal Department to compile this small book, "Essential Solutions to New and Complex Legal Issues in Commercial Banks," which will help commercial bank managers, business personnel, and legal compliance personnel enhance their understanding of the current new and complex legal issues faced by commercial banks and apply them effectively in management and operational practices. This book mainly introduces content such as credit and guarantees, deposits, bill settlement, factoring business, international settlement, and trade financing.