Interpretation of the Banking Supervision and Administration Law of the People's Republic of China: Article 4

Article 4 The Banking Supervision and Administration Agency of the State Council shall carry out supervision and administration of the banking industry in accordance with the principles of law, openness, fairness and efficiency.

[Interpretation] This article is about the principle of supervision and management of the banking industry.

I. Significance of the Principles of Supervision

(1) The Principles of Supervision are the embodiment of legal principles in the field of supervision.

Legal principles are the basis of legal rules, play a comprehensive guide, the role of coordinating social relations, is the economic, social and cultural principles in the field of law, the principles of the law in each piece of legislation is indispensable. The principles of regulation, on the other hand, are the embodiment of the principles of law in the field of regulation and belong to the specialized principles of law. Regulatory principles should not only reflect the general principles of law, but also to meet the objective requirements of regulation, with relative independence.

(2) the principle of supervision is to improve the level of supervision, safeguard the legitimate rights and interests of banking financial institutions need.

Regulatory principles are the overall norms of banking supervision and management behavior, must be observed and reflected in the implementation of specific regulatory process. State administrative organs in the administration of the law how to safeguard the legitimate rights and interests of the administrative relative is the formulation of administrative regulations must be considered. The CBRC and its supervisors are in a strong position when implementing the supervision and management of banking financial institutions, and safeguarding the rights and interests of banking financial institutions as the subject of supervision is a major issue. For this reason, this article stipulates that the supervision and management of the CBRC shall follow the principles of "lawfulness, openness and fairness". In addition, according to the characteristics of banking supervision, the principle of "efficiency" is added.

The explanation of specific principles

After comparing the international regulatory principles, combining the basic principles of administrative law and China's regulatory practice, the regulatory principles are determined to be the four principles of lawfulness, openness, fairness and efficiency.

(I) the principle of law

The principle of law means that the setting and exercise of regulatory authority must be based on the provisions of laws and administrative regulations. The principle of law is the basic principle of administrative law, the legal nature of supervision is an administrative act, so supervision should follow the principle of law. The content of the principle of law includes any regulatory authority must be based on the authorization of the law in order to exist; the exercise of any regulatory authority in accordance with the law, abide by the law; the granting of any regulatory authority and its use must be based on the law.

Banking supervision and management institutions in the implementation of supervision and management process, the principle of law is mainly reflected in two aspects, one is in the formulation of regulations and other normative documents, should comply with the provisions of laws and administrative regulations, and shall not conflict with them, because the laws and administrative regulations is the banking regulations of the superior law, the subordinate law must comply with the provisions of the superior law. Secondly, in the process of market access, daily supervision and market exit, the implementation of administrative licensing, on-site inspection and off-site supervision, administrative penalties and other specific administrative acts, must be based on laws, administrative regulations and rules, without which, they shall not be implemented.

(B) the principle of openness

The principle of openness is also one of the basic principles of administrative law, the basic meaning of the regulatory action for in addition to the confidentiality of the law should be carried out openly; administrative regulations, rules, regulatory policies and banking supervision and management agencies to make the rights and obligations of administrative counterparts to influence the behavior of the standards, conditions, procedures should be published according to law. Mainly includes four aspects, first, the regulatory legislation and policy public; second is the regulatory enforcement behavior public, including regulatory standards, conditions, procedures, involving the significant rights and interests of the relative such as major administrative penalties should be taken in the form of public; third is the basis of administrative reconsideration, standards, procedures should be made public; fourth is the administrative information should be made public.

(C) the principle of justice

The principle of justice refers to the equal legal status of participants in the banking financial market, and the CBRC should treat them equally. The principle of impartiality includes the requirements of both substantive and procedural impartiality. The requirements of substantive impartiality include: supervision in accordance with the law without favoritism; equal treatment of the relative without discrimination; reasonable consideration of relevant factors without arbitrariness. The requirements of procedural fairness include: to handle matters or adjudicate disputes in which one has an interest, the system of recusal shall be implemented; not to make regulatory actions unfavorable to the administrative counterpart without prior notice and hearing the defense of the counterpart.

(4) Principle of Efficiency

The principle of efficiency refers to the fact that in exercising its supervisory authority, the banking supervisory and regulatory body shall, in the shortest possible time and at the lowest possible cost, strictly follow the administrative procedures and time limits, have a lean supervisory body, conduct cost-benefit analyses of supervisory acts, make the supervisory legislation and acts as reasonable as possible, and reduce the costs and bring benefits for the State, the society and the administrative counterparts. The benefits for the State, the society and the administrative counterparts are realized.

The Core Principles for Effective Banking Supervision state (Introduction to Section I): "It is important to recognize that there is a tension between the protection provided by regulation and the cost of financial intermediation. The greater the demands placed on banks and the financial system to reduce risk, the more detailed the regulation, the higher the costs required, and ultimately the inevitable negative impact on innovation and resource allocation." Therefore, bank regulation should be guided by the principle of efficiency and must be analyzed in terms of costs and benefits. The benefits of regulation mainly include the reduction of risk losses in the banking system and the increase of market efficiency due to the implementation of regulation, and the costs of regulation mainly include the direct costs borne by the regulator and the indirect costs borne by the regulated, etc. That is, on the one hand, banking supervision should be effective in allocating and utilizing regulatory resources, and on the other hand, the restrictions and regulatory requirements imposed on banking financial institutions and markets should be commensurate with the resulting benefits to consumers and the banking sector. The regulatory principles put forward by the UK Financial Services Authority (FSA) include the principle of efficiency and economy, and the principle of matching regulation with benefits (proportionality).