System Improvement of the Risk Prevention and Disposal of Small and Medium-sized Banks Under the Formulation of the Financial Stability Law

The current economic and financial situation is in a critical period of cyclical transformation. The risks of small and medium-sized commercial banks in China are continuously exposed to special risks. Thus, the measures to prevent and handle the risks of small and medium-sized banks must take the legal system as the root based on keeping pace with the times, so as to solve and innovate from the legislative source. Up against the formulation of the Financial Stability Law (Draft) (hereinafter referred to as the Draft), this paper analyzes the conceptual characteristics and risk causes of small and medium-sized banks from the dimensions of space and time, such as high leverage and high debt operation, strong stakeholders, relatively concentrated equity, etc. From the perspective of legislative theory, the particularity of the institutional arrangement of the Draft is analyzed, including stability priority, targeted monitoring and prevention mechanism, and clear responsible subjects. It can be found that the risks of provincial small and medium-sized banks are difficult to resolve, and the internal and external disposal of risk responsibility subjects is improper. In this regard, some countermeasures and suggestions are put forward, such as improving provincial financial supervision legislation, resolving inter-provincial business risks, clarifying the main body of risk responsibility and building a risk monitoring and prevention system.