New financial system seeks to blend rules and forestall risks
Print Edition
China is to set up a cross-department financial regulatory system to enhance coordination and prevent risks in multi-financial sectors.
The State Council, China’s Cabinet, has approved a proposal from the People’s Bank of China to host regular quarterly meetings as well as urgent discussions with the country’s securities, banking, insurance and foreign exchange watchdogs, the Cabinet said in a statement yesterday.
The new system’s major tasks are to coordinate monetary policies and financial rules, maintain financial stability, prevent systematic risks, encourage cross-sector financial innovation, and share financial information, the statement said, adding that the central bank can also ask the Ministry of Finance and the National Development and Reform Commission, China’s top economic planner, to participate in the meetings when necessary.
The cross-department financial regulatory system will report to the Cabinet, and its creation will not affect the role of current supervisory bodies as it would not be a policymaker.
But this is contrary to market expectations, which have long speculated that China would create a super agency for financial regulation to cut bureaucratic infighting and quicken reforms.
For example, the development of China’s bond market is undermined by turf wars between three different regulators. The central bank governs bond sales in the interbank market, the China Securities Regulatory Commission oversees bonds issued by listed companies, and the NDRC approves bond issuance by non-public firms.
The new move is likely to target shadow banking, which usually operates across trade, trust, insurance and foreign exchange sectors, said a trust manager who declined to be named.
Ding Shuang, a Citigroup economist, said the need to coordinate regulations became urgent after Chinese banks suffered the decade’s worst credit crunch in June, when inconsistent policies among regulators magnified the crisis.
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