Renmin University professor Yang Dong: The healthy development of Internet finance requires institutional support

【Abstract】Internet finance is the embodiment of financial innovation in the information age and has developed rapidly in my country in recent years. Internet finance is directly oriented to small and micro investors and financial consumers, with direct finance as its core competitive format, which effectively exerts the functions of finance in terms of financing and reducing transaction costs.

Internet finance is the embodiment of innovation in the financial industry in the information age, and has developed rapidly in my country in recent years. Internet finance is directly oriented to small and micro investors and financial consumers, with direct finance as the core competitive format, so that the financial financing function and the function of reducing transaction costs can be effectively exerted. However, the development and application of Internet technology have not reduced the risks of financial activities. On the contrary, the speed and popularity of the Internet have added new risks to financial activities to a certain extent. This requires us to incorporate Internet finance into the financial regulatory system, rely on institutional protection innovation, prevent risks, and promote the healthy and orderly development of Internet finance.

Compared with the traditional financial industry, Internet finance presents some new features. For example, transaction costs are low. Relying on new technologies such as mobile Internet, big data, and cloud computing, Internet finance has changed the transaction interaction model, making small-scale, decentralized financial transactions easier to handle, reflecting the advantages of fast, convenient, efficient, and low-cost. However, this financial model also incorporates many low-risk bearers into the financial system. While these low-risk bearers enjoy financial dividends, they also magnify financial risks.

Another example is the short growth cycle. With the rapid development of Internet finance, the growth cycle of Internet finance companies from the incubation period to the maturity period has been greatly shortened. Taking the P2P (person-to-person) industry as an example, the development of my country's P2P industry has only been a few years, but in 2015, the total industry turnover reached 1 trillion yuan, and there were more than 2,000 P2P platforms. In the case of my country's relatively backward financial regulatory system, the rapid and large-scale "barbaric growth" of the Internet finance industry has led to high potential systemic risks.

Compared with the rapid development of my country's Internet finance industry, the formulation and improvement of relevant systems and laws are relatively lagging behind. For example, there are still large gaps in the supervision of the P2P industry and equity crowdfunding, and there has been a long-term lack of clear industry standards; the information disclosure mechanism of relevant enterprises is not sound, and there are no unified regulations on how to deal with false information disclosure; there are no effective measures to protect investors, etc. The lag in system construction has hindered the healthy development of Internet finance. At present, we should adhere to a prudent attitude, encourage financial innovation, control systemic risks, and promote the healthy development of Internet finance by improving the system.

Innovative regulatory system

In view of the fact that segmented supervision is difficult to deal with the regulatory gaps in Internet finance supervision, we should consider establishing a comprehensive Internet finance supervision system. This comprehensive supervision system can be led by the China Banking Regulatory Commission in the P2P field and the China Securities Regulatory Commission in the equity crowdfunding field, with other departments as coordinating agencies, and realize the sharing of supervision information and data. We should uphold the principle of open supervision and adhere to the concept of giving equal importance to supervision during and after the event. Adhering to open supervision and lowering the entry threshold of the financial industry does not mean that supervision will not take action, but rather that a dynamic supervision system should be established to monitor the overall risks of the industry and promptly discover individual risks. The regulatory authorities should be good at leveraging the power of industry self-regulatory organizations to promptly discover problems in the industry and properly resolve them in accordance with the law.

Establishing a mandatory information disclosure mechanism

Information asymmetry and the resulting credit risk are the main risks of Internet finance. Establishing a mandatory information disclosure mechanism is an important part of protecting the rights and interests of small and micro investors and financial consumers. Information disclosure should be mandatory for Internet financial companies' operations, assets, finances, and other information that may affect whether investors and consumers choose the company. If information disclosure is inadequate or even involves information fraud, the corresponding legal responsibilities should be clarified to encourage Internet financial companies to operate in compliance and in good faith. At the same time, a risk assessment and early warning mechanism should be established to make effective and accurate assessments and early warnings of industry risks with the help of big data and cloud computing technologies.

Strengthen investor protection

Protecting investors is an important goal of Internet financial risk regulation. A special investor classification system should be established to set different investment limits for different categories of investors. Individual investors and institutional investors with higher risk-bearing and risk-identification capabilities should be allowed to participate in investment activities with higher risks; individual investors with lower risk-bearing and risk-identification capabilities should be limited in their investment amounts to avoid investment risks exceeding their own tolerance. A sound dispute resolution mechanism should be established in the field of Internet finance, and a reasonable dispute resolution procedure should be established to protect investors efficiently and conveniently.