1. Group holding and joint operation. Group holding refers to the existence of a holding company as the parent company of the group. The holding company can be a simple investment institution or an operating institution with financial business as the carrier. The former is a financial holding company, while the latter is a bank holding company and an insurance holding company.
2. Separation of legal persons to avoid risks. The separation of legal persons is the second important feature of financial holding groups, that is, different financial businesses are run by different legal persons. Its function is to prevent the mutual transmission of different financial business risks and curb internal transactions.
3. Financial consolidation, each negative profit and loss. According to the internationally accepted accounting standards, the holding company should consolidate the financial statements of more than 565,438+0% holding subsidiaries in accounting. The significance of consolidated statements is to prevent double counting of capital and financial gains and losses of subsidiaries and avoid excessive financial leverage. On the other hand, under the framework of the holding company, each subsidiary has an independent legal person status, and the responsibility of the holding company to the subsidiary and the responsibility of the subsidiary to each other is limited by the amount of capital contribution, rather than the holding company being solely responsible for profits and losses, so as to prevent individual high-risk subsidiaries from dragging down the whole group.
What are the advantages of financial holding mode?
1. The financial holding mode is conducive to the transformation from separate operation to mixed operation.
Under the supervision system of financial separation, it is the best mode to realize the transformation from separate operation to mixed operation by setting up holding companies and holding shares in financial assets such as securities, banks and insurance. Taking the holding company as the capital operation platform, we will develop other financial businesses through mergers and acquisitions or set up new subsidiaries, build a financial service platform and establish a full-featured financial service group.
2. Flexible supervision of the holding company model.
(1) Regulatory pressure. Under the supervision system of separate operation of the financial industry, the establishment of holding companies is in line with the spirit of separate operation and separate supervision. Holding companies hold the equity and other financial assets of banks, and financial subsidiaries hold their own business licenses, operate independently and accept the supervision of their respective regulatory authorities. At the same time, it will reduce the regulatory pressure brought by a single financial institution carrying out other financial services at the same time.
(2) Corporate governance. Holding companies have greater flexibility in corporate governance structure and do not need to meet the regulations of various financial business supervision departments on corporate governance structure. For example, in Hong Kong, according to the Banking Ordinance, the Financial Supervisory Authority has the power to examine and approve the appointment of the board of directors of banks, and banks will be more constrained in corporate governance than holding companies.
3. The holding company model is conducive to the formation of synergy.
Through the acquisition and merger of different types of financial institutions, financial holding companies have great synergistic advantages. In addition, financial holding companies can combine the advantages of different regions and different financial products when formulating enterprise development strategies. In the environment of fierce competition in the financial industry, there are two options:
(1) Increasing the number of single financial service products, such as expanding regional branches and business outlets of banks, can absorb more deposits. The significance of this approach is that as long as a big bank buys a small bank, it can reduce the high cost of a small bank, which brings economies of scale due to the reduction of average cost.
(2) Increase the types of financial service products, such as securities business and insurance business operated by banks. A branch of a bank can sell different financial service products such as securities, funds and insurance at the same time, which greatly reduces the cost and saves a lot of manpower and expenses compared with setting up a separate branch. By increasing the variety of financial service products, the reduction of average cost brings about economies of scope.
4. The holding company model is conducive to business development.
The motivation for the emergence and existence of financial holding companies lies in their innovative business, that is, the reorganization and derivation of various elements within the financial field. Under the holding company, banks, securities, insurance and other subsidiaries operate independently, which has more room for business development and higher freedom, which is conducive to the full development of each subsidiary in their respective fields; Under the holding company model, the cross-selling of various businesses and products is more market-oriented, with high transparency, and the handling of related transactions is more standardized and clear, which is conducive to better realizing the cross-selling of businesses and products. The second half of the 20th century is a period of rapid development of financial innovation. The main contents of financial innovation business related to financial holding companies include "financial supermarkets" or "one-stop financial services" and online financial services.
5. Holding company model is conducive to reducing risks.
(1) The holding company model is conducive to reducing business risks. The holding company only exercises the function of equity investment, and the management of different business subsidiaries is independent of each other, which can not only ensure high business management ability, but also avoid the great pressure of a single financial institution to manage other financial businesses at the same time.
(2) The holding company model is conducive to reducing market risks. Under the holding company model, commercial activities such as cross-selling between banks and other businesses are under the supervision of the market, with higher transparency and lower risk.
(3) The holding company model is helpful to improve the risk tolerance. Various financial businesses are carried out in independent subsidiaries, and a subsidiary does not need to bear losses for the risks of other businesses; Even if a subsidiary has a business crisis, other subsidiaries can still operate as usual, without having to bear the responsibility with their own funds, which is conducive to ensuring the safety of their own funds.
6. Holding company mode is beneficial to capital operation.
Judging from the use of raised funds, holding companies have greater flexibility in the allocation of funds. For example, it may take a long time for banks to reduce their capital level due to capital surplus, which may require the approval of relevant regulatory authorities, while holding companies do not have the above restrictions, which is conducive to improving the efficiency of capital use.
At the same time, the holding company model is more convenient for subsequent financing. For example, according to the relevant regulations of Hong Kong, the injection of other assets into the holding company only needs to comply with the Hong Kong Listing Ordinance and the Code of Takeovers and Mergers of Companies, and does not require the approval of the Hong Kong Monetary Authority; Any assets injected into listed banks must be subject to the dual supervision of securities regulators and HKMA.
Potential risks of financial holding companies
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.