Reg­u­la­tors high­light fi­nan­cial sta­bil­ity

China Daily (Hong Kong) - - BUSINESS - In­sur­ers urged to take pre­cau­tions against risks Risks in China’s bank­ing sec­tor con­trol­lable CSRC pledges stronger mar­ket su­per­vi­sion

Ed­i­tor's Note: China’s top pol­i­cy­mak­ers will gather this week­end at the Cen­tral Fi­nan­cial Work Con­fer­ence in Beijing to dis­cuss and for­mu­late poli­cies for the coun­try’s fi­nan­cial sec­tor. The meet­ing, which is held once in five years, will set the tone for the coun­try’s fi­nan­cial poli­cies and re­form in com­ing years with a fo­cus on strength­en­ing co­or­di­na­tion among var­i­ous reg­u­la­tors and prevent­ing sys­temic fi­nan­cial risks. This cur­tain raiser presents in­sights and views of reg­u­la­tors from the bank­ing, se­cu­ri­ties and in­sur­ance sec­tors.

Chen Wen­hui, vicechair­man of the China In­sur­ance Reg­u­la­tory Com­mis­sion, said China’s in­sur­ance in­dus­try is fac­ing a num­ber of risks, in­clud­ing liq­uid­ity pres­sure and rep­u­ta­tion man­age­ment. He urged in­sur­ers to take pre­cau­tions against such risks.

“Most tra­di­tional large and medium-sized in­sur­ance com­pa­nies keep risks un­der con­trol, while for some rad­i­cal firms, hid­den risks loom large as t hey ex­pe­ri­enced sur­pris­ingly fast busi­ness ex­pan­sion in re­cent years,” Chen told Xin­hua i n an ex­clu­sive in­ter­view.

“The as­set size of China’s in­sur­ance in­dus­try ex­ceeds 16 tril­lion yuan ($2.4 tril­lion). How­ever, the in­dus­try’s liq­uid­ity risk is mainly caused by a few com­pa­nies,” Chen said, sug­gest­ing that those com­pa­nies should slim down by chop­ping off non-core busi­nesses to ease liq­uid­ity pres­sure in the short term.

The CIRC has made tar­geted risk warn­ing, su­per­vi­sion and dis­po­si­tion plans for the in­dus­try, ac­cord­ing to Chen.

The in­sur­ance reg­u­la­tor will con­tinue to guide in­sur­ers to fo­cus on core busi­nesses. In­sur­ance funds will be guided to serve na­tional strate­gies and in­fra­struc­ture, Chen said.

The reg­u­la­tor will also strengthen the sec­tor’s role in sup­port­ing the real econ­omy, Chen added.

The deputy head of China’s bank­ing reg­u­la­tor said risks in the sec­tor are gen­er­ally con­trol­lable de­spite lin­ger­ing un­cer­tain­ties. Wang Zhaox­ing, vice-chair­man of the China Bank­ing Reg­u­la­tory Com­mis­sion, said the com­mis­sion has made head­way in the pre­ven­tion and con­trol of risk.

“More en­ergy has been chan­neled into dis­solv­ing non-per­form­ing loans ... and vi­o­la­tions in fi­nan­cial mar­kets have been con­tained, with com­pe­ti­tion more ra­tio­nal and busi­ness op­er­a­tion more nor­mal,” Wang said, adding that illegal fund rais­ing cases have dropped sub­stan­tially.

Bad loans have re­mained at a low level in China. The NPL ra­tio of Chi­nese banks stood at 1.86 per­cent by the end of May, with sta­ble liq­uid­ity and abun­dant cap­i­tal and pro­vi­sion.

“Banks’ prof­itabil­ity and risk re­sis­tance are good com­pared with global peers, and the in­ter­na­tional in­flu­ence is also on the rise,” Wang said.

Wang’s re­marks came amid the coun­try’s on­go­ing cam­paign to rein in fi­nan­cial risks and delever­age as a firm econ­omy pro­vides more lee­way to such mea­sures, which partly aim to cush­ion the im­pact of US rate hikes.

Banks and other fi­nan­cial in­sti­tu­tions have been sub­ject to stricter su­per­vi­sion, and ac­tion has been taken against ir­reg­u­lar­i­ties, such as shadow bank­ing

Wang noted that the sit­u­a­tion

re­mains grim and told the com­mis­sion that “not a sin­gle risk will be ne­glected and not a sin­gle haz­ard will be let go.”

He warned of more de­faults from debt-rid­den com­pa­nies, in­creas­ing cross-mar­ket and cross-in­dus­try fi­nan­cial ac­tiv­i­ties, and sharper fluc­tu­a­tions.

China will strengthen over­sight on the se­cu­ri­ties mar­ket to keep it fair, open and im­par­tial, Jiang Yang, vicechair­man of the China Se­cu­ri­ties Reg­u­la­tory Com­mis­sion, said in re­sponse to ques­tions about pri­or­i­ties in the next phase of the CSRC’s work.

“The reg­u­la­tor will con­tinue to crack down on vi­o­la­tions of se­cu­ri­ties laws and reg­u­la­tions, in­clud­ing in­sider trad­ing and mar­ket ma­nip­u­la­tion,” Jiang said.

So far this year, the CSRC has im­posed administrative penal­ties on 113 cases and slapped to­tal fines of 6.4 bil­lion yuan, which is 1.5 times last year’s to­tal.

Mean­while, the CSRC has pro­hib­ited 30 peo­ple from en­ter­ing the mar­ket, al­most equiv­a­lent to the to­tal num­ber in 2016, Jiang said.

China will ad­vance re­forms to make the cap­i­tal mar­ket bet­ter serve the real econ­omy. And the cap­i­tal mar­ket will open wider to for­eign in­vestors in a steady way and do­mes­tic bro­ker­ages will ex­pand busi­ness over­seas, Jiang said.

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