The paper mainly explores how to build regulating mechanism between local financial risk and local government liabilities with the increasing of local government liabilities after the financial crisis. Firstly, the paper analyzes the inherent motive mechanism to promote the increasing of local government liabilities, then illustrates that high leverage and high investment of local project has the potential probabilities to induce the rising of local financial risk. Therefore, it is meaningful to build the linkage mechanism between local financial risk and local government liabilities. The paper analyzes the building way and the important areas to which should be paid more attention to protect the potential financial risk.