Behavioral risk in financial industry, behavioral regulation and financial consumer protection

Abstract：This paper analyzes the financial industry to be risk， behavior supervision， financial consumption， consumer protection and their relationship， and points out that prudential supervision and behavior， supervision （financial consumer protection） are complementary， complementary and different， there is also the potential for conflict. There is an organic balance between prudential regulation and behavioural regulation. Sub-cargo crisis shows that the past regulatory practice yin more easily ignore the behavior， supervision， weakening the financial consumer protection. After the crisis， countries are stepping up enforcement and regulation. Our country also needs to combine， the domestic actual situation， consummates the behavior supervision system， forms the prudential supervision， the supervision and the behavior supervision， the effective complementary supervisory framework.

Key words：behavioral regulation; financial consumer protection; prudential regulation

1.Behavioral， regulatory and financial consumer protection

Behavioral regulation refers to the supervision and management of financial and institutional operations by regulatory departments， including information disclosure requirements， prohibition of fraud and misleading， protection of personal finance， financial information， opposition to improper conduct， and when competition， to combat market manipulation， and insider trading， regulate advertising， contractual and debt collection practices， focus on the protection of vulnerable groups， and promote the integrity of financial institutions and consumers， at the same time， to formulate relevant rules around these， establish on-site inspection and off-site supervision system， promote Square Deal， maintain market order， enhance consumer confidence， to ensure the healthy and sound functioning of the financial markets.

2.The relationship between behavioral regulation and financial consumer protection

Behavioral regulation and financial consumer protection are used as equivalents or substitutes in many contexts. But strictly speaking， they are not the same concept. Financial consumption， consumer protection， is regulated by the regulatory sector， regulating the conduct of financial institutions， reducing the risks and hazards faced by consumers in the use of any financial products， and services， as well as in the development of business relations with financial institutions. From the work， content， financial consumer protection is a part of the work of behavior supervision， so behavior supervision， the extension is wider. Behavior supervision not only regulates the behavior of financial institutions and natural persons when they conduct transactions， but also regulates the behavior of financial institutions and non-financial enterprises when they conduct transactions. Manipulation of inter-bank lending market， market interest rates， manipulation of exchange rates， anti-money laundering and other acts of supervision， and consumer protection has no direct relationship. Of course， a lot of the work of behavioral regulation is related to finance， consumer protection. This article refers to behavioral regulation， mainly focused on financial consumer protection， does not involve the wholesale market， market and other aspects of behavioral regulation.

3.The relationship between Prudential Regulation and financial consumer protection

Prudential regulation is the regulatory authority that， in order to guard against individual risks in financial institutions， by setting capital adequacy， asset quality， loan loss provisioning， risk concentration， medium liquidity， securities firms， liquidity， insurance companies， solvency， company， governance， etc. ， to provide prudent guidance， organize regular on-site inspections， monitor and assess their risk profile， and conduct timely risk early warning and disposal to safeguard the financial system， stability. Obviously， prudential supervision is also to protect the rights and interests of depositors and other customers.

There are also potential conflicts between prudential regulation and financial consumer protection. The former focuses on financial institutions， on risk prevention and on ensuring the stability of financial institutions; the latter focuses on consumers， on protecting consumers' rights and interests. The British economist Ta yl or has described the difference between prudential regulation and behavioral regulation as being similar to that of doctors， whose professional habits prompt them to try to treat diseases once they are discovered， rather than being held to account， behavior regulation is more like the police， which tend to impose immediate penalties for disciplinary violations. Second， the strict conduct supervision， the infringement of financial consumption， consumer rights and interests， heavy penalties in the short term， may worsen the prudential supervision indicators.For example， because of the lack of behavioral risk management and regulatory oversight， a sub-prime mortgage product， which sold well， greatly improved the financial indicators， of financial institutions in the short term， and thus made the prudential indicators very good-looking; But behavioral regulators find that there's a lot of misinformation， and fraud in product sales， and that can lead to investigations and heavy penalties， which can affect prudential indicators. This is also the establishment of the FCA process opposition， a concern.

Reference

[1] Sun Tianqi， financial consumption， consumer protection， market failure， government intermediaries and Moral Hazard， prevention， economic and social system， comparison， 2012 No. 2，209 -217 .

[2] Sun Tianqi， financial consumption， consumer protection： theoretical interpretation， analysis and policy， policy recommendations， research on financial regulation， No. 4，2014，36 -60 .

[3] Wang Huaqing， finance， Consumer Protection： Theoretical Logic， and policy， policy framework， finance and Economics， 2014， No. 2 .

作者简介：陈恺（2001.4.18-）男，汉族，北京市，本科，北京金融科技学院，邮编101118，研究方向：金融学。