The aim of the proposed course is to present to the students the legal framework on regulation, supervision and consumer protection in the European financial market. The proposed course will cover the current rules on financial services that have been refined and strengthened following the 2008 global financial crisis and the 2011 euro crisis. The overall objective of this course is not to limit the discussion from the European Union (EU) perspective but to focus on its especially to the Chinese financial market.
The proposed course will be specifically tailored to adapt to the proposed financial market reforms envisaged in the five plan of the Chinese government for the period 2016-2020. The overall objective for deepening reform in the next 5 years of the Chinese financial market is to increase and enhance the efficiency and quality of the services offered by the financial industry to the real economy. The proposed reforms are all aimed at better allocation of financial resources and allowing the market to play a more decisive role. The five year plan also envisages the recent inclusion of the Chinese currency, yuan in the Special Drawing Rights (SDR) basket of the International Monetary Fund (IMF).
The aim of the proposed course as outlined below is to provide a road map for the reform of the Chinese financial market over a period of five years based on the EU experience in financial market regulation, supervision and consumer protection.
Overview of the proposed course
Duration of the course: four weeks
Number of credits: 3
Number of sessions: 16
Each session: 2.25 hours
Session 1-2-Overview of the EU
The first two sessions will provide an overall introduction to the European Union as an international organization. The main focus in these sessions is to provide an introduction to the institutional structure of the EU and the method of decision making. The aim of adopting this approach is to facilitate the students to simplify the learning of the method of regulation and supervision of the EU’s financial market. In this context the role of different institutions and procedures followed by them to adopt both hard and soft laws in the financial market.
Session 3-6-What constitutes CAPITAL and FINANCE
The main objective of the EU is to construct a single market in goods, persons, services and capital in a uniform and harmonious manner. An important objective within the framework of the single market is to develop a market in financial services common to all 28 Member States of the EU.
The concept of financial services is defined broadly to cover three specific sectors, namely banking, insurance and investment services. In view of the limitation of time, the proposed course will be limited to the banking sector. However most of the legal issues that will be addressed in this course in relation to banking services are also equally relevant and applicable to the other two sectors.
The main thrust of these two sessions is to give a comprehensive picture of the legal regime governing the movement of money, which is the life blood of any financial market. In this exercise a broad range of legal and financial issues will be discussed. The legal mechanism adopted to liberalize the cross border movements of money will be examined at length. In this process the relevant legal instruments will be critically analyzed and presented to the audience.
The case law of the European Court of Justice (ECJ), the judicial wing of the EU, will be examined in detail. The ECJ have made a major contribution to the development of the financial market of the EU and a case study approach will be adopted in this context.
The EU law does not precisely define what constitute capital or movement of capital and this legal vacuum have been filled to a great extent by the ECJ. The ECJ have declared that capital does not merely constitute money in the form of banknotes but gives a broad interpretation such as cross border investment in real estate, the provision of financial guarantees, etc. The relevant judgments of the ECJ will be presented and discussed at length in this course.
Finally the EU has adopted a more liberal approach in relation to the free movement of capital. Unlike the free movement of goods and persons, the EU law provides for globalization of the free movement of capital. In other words, the EU law not only liberalizes the free movement of capital within the Union but also extend this freedom to countries outside the EU such as China. The legal regime regulating such flows of capital will be critically presented to the students.
The internationalization of the free movement of capital have contributed to develop the euro, the single currency of majority of the Member States of the EU as a competitive international currency. There are various agreements entered into between the European Central Bank, the monetary authority of the EU and the Peoples Bank of China for the mutual use of the euro and RMB both in the EU and China. In this context, the essential features of this currency agreement, the extent to which it contributed to facilitate the payments for goods and services between the EU and China will be examined. It will also examine the extent to which the currency cooperation between the EU and China could contribute to the efficient operation of the yuan in the SDR of the IMF.
Session 7-10- Banking Law
The banking law of the EU will be comprehensively covered in these sessions. A wide range of financial and legal issues relating to banking services will be highlighted and discussed. The legal regime relating to the procedure in licensing of banks and how such banks could acquire a European passport will be explained in detail.
The kind of financial services that could be provided by such European passport across the borders will be examined. The EU law on banking services has facilitated the creation of financial supermarkets enabling the service providers and financial consumers to provide and to have access to a wide range of financial products. The presentations will highlight under banking law a credit institution which acquires a European passport could provide not just traditional banking services such as deposit taking and lending but could also provide securities services such as marketing of securities products, advising on mergers, etc.
As in the case of free movement of capital, the EU is also more liberal in opening its financial market to banks from outside EU such as China. In this context, the EU adopts a dual approach known as product and geographical market access based on the principle of reciprocity. In this context a case study will be presented to examine how a Chinese bank could enter one of the Member States of the EU and thereby acquire a European passport to provide its services in all twenty-eight Member States without any barriers or discrimination.
Session 11-12-Money laundering and terrorist financing
One of the problems confronting many countries across the globe is the criminalization of the financial market. A major concern in this context is the risk of money laundering and terrorist financing through the medium of the financial market.
The EU have recognized this problem and adopted a series of legal measures to prevent or minimize the risk of such financial crimes being committed within its territory. There are several legal obligations imposed on the financial operators to ensure their institutions are not used as avenues for the purpose of money laundering and financing of terrorism.
A case study approach will be adopted in this context to simplify the complex legal rules not only to prevent but also effectively combat money laundering and terrorist financing through the medium of financial institutions.
A comparative study of the EU and Chinese approach to combat financial crimes will be discussed in the class room. Both EU and China are not free from financial crimes such as bribery and corruption and how they deal with this serious crimes will be covered in the lectures.
Session 13-14-Taxation of financial services
With globalization of financials services, the financial industry is not only at risk of being manipulated for money laundering and terrorist financing but also have widened the scope of tax avoidance, thereby depriving the governments of billions of dollar worth of tax revenues. The EU has adopted various legal measures in the field of taxation of financial services. In view of the complexity, sensitiveness and different cultures in the field of taxation, the EU law has adopted a dual approach to ensure that income from capital income is subject to taxation. It provides for withholding taxation and information system as a form of cooperation between the Member States to ensure the proper and legitimate collection of taxation of capital income.
In this context, the EU adopt a similar legal approach to ensure the collection of taxes even outside its jurisdiction such as in Switzerland, Singapore, Dubai or any other so called tax paradises. This is done by way of diplomacy and international tax agreements. One of those tax agreements and its relevance to China will be discussed in this course.
Session 15-16- Payment services
During the initial stages of the construction of the financial market, the EU did not wish to interfere with the operations of the financial industry. In order to ensure that the consumers benefit from its liberal financial market, the EU adopted a series of soft law in the field of payment services.
Since the financial industry failed to provide cross border payment services in a safe and efficient manner at reasonable bank charges, the EU had to intervene and adopt certain hard law legal measures. There are various rules adopted to ensure credit transfers across the borders are made efficiently, reliably and cheaply. It also provides for an efficient payment system based on contracts between the service provider and user. These legal instruments have a universal appeal which will be discussed with specific focus on the protection of the Chinese consumers in the field of payment services.
The use of Bitcoins as a medium of payment is rapidly growing especially in the EU and China. However this product is not sufficiently regulated in any country, not even in the EU or China. During the lectures it is proposed to examine how such new payments could be regulated and not least protected from becoming a victim of money laundering and a vehicle for terrorist financing.
Session 17-18-Consumer protection
Consumer protection is an essential and important element of the EU’s financial market. A comprehensive presentation will be made of the relevant laws dealing with the protection of the bank depositors. In the process, the relevance of these laws to the Chinese banking market will be highlighted.
In the banking sector the EU have adopted a series of legislative measures to protect the deposits of the public in varying degrees. The aim of introducing a deposit guarantee scheme is to ensure that in the event of a bank going bankrupt, the deposits of the public are protected. The guarantee schemes are funded by the financial industry without any contribution from the bank depositors.
