Support for new Chinese banking oversight body

TEN DAYS after China decided to set up a new financial oversight body, regulators and industry sources have expressed support for the move to strengthen regulation.

The quinquennial national financial work conference, which ended on July 15, has decided a new financial stability and development committee will be set up under the State Council, with the central bank taking on a bigger role in managing financial-market risk.

As China grapples with multiple risks stemming from misallocated investment and shadow banking, decision makers are counting on tighter regulation to root out systemic risk in the financial sector. The committee’s office will be based at People’s Bank of China (PBoC), the central bank, a PBoC official said.

The committee’s responsibilities include formulating development and reform plans for the financial sector, co-ordinating financial policies, ensuring regulatory cohesion, formulating rules to fill regulatory gaps, and holding regulators accountable when supervision is lacking, according to the official.

“Macro prudential management, coupled with prudent monetary policy will fundamentally ensure the real economy access to financial support and a stable run of the financial sector,” the official said.

To this aim, China should unswervingly carry out prudent monetary policy, improve risk monitoring and early warning systems and shore up weak links in supervision, the official said. Meanwhile, comprehensive co-ordination should be strengthened, corporate governance be pushed in financial institutions and financial reforms deepened.