1. System risk
Because financial holding companies occupy too many financial resources, their systemic risks are more harmful. In a financial holding company, no matter how the risks of departments are dispersed, even if there is no risk in the system, the risks outside the system will spread to the system. In the financial holding company or universal banking system, this kind of risk that cannot be dispersed may lead to systemic risk. This is because, first of all, the financial resources controlled by financial holding companies or universal banks occupy the vast majority of financial and economic activities, which may put the overall economy at risk; Secondly, financial holding companies or universal banks have established closer ties between banks and industries, which may make the impact spread more easily.
2. Insider trading and conflict of interest
Related transactions between subsidiaries of financial holding companies make the operating conditions of subsidiaries within the group affect each other, which increases the risk of insider trading and conflict of interest of financial holding companies. Due to the mutual influence of the interests of subsidiaries within the group, insider trading may occur between subsidiaries, which may harm the interests of consumers.
3. The financial leverage ratio is too high
Financial holding companies can improve the financial leverage ratio. For example, the capital allocated by foreign capital from the head office to subsidiaries (such as issuing bonds or borrowing money) is reflected in the balance sheets of the head office and subsidiaries. If subsidiaries continue to invest in the Group with this fund, the fund will be reused, which means that the repeated calculation of assets may make the financial leverage ratio of the whole Group too high and affect the financial security of the Group. For details, please refer to the Analysis Report on Trend Foresight and Development Strategic Planning of China Financial Holding Company.