China to unify local financial regulatory and supervisory rules

Photo shows the headquarter building of the People's Bank of China in Beijing. (Xinhua/Wu Yu)

BEIJING, Jan. 6 (Xinhua) -- Chinese central bank, the People's Bank of China (PBOC), invited from December 31, 2021, public opinions for its draft of local financial supervision and administration rules, which, as analysts say, hinted unification of local financial regulatory rules and standards in the country.

Industry insiders said that debut of the rules will further facilitate prevention and resolution of regional financial risks and boost healthy development of financial systems in Chinese localities.

-- Born amid expectations of industry players

The draft, born at a tenor when local financial business operation of different types developed rapidly recent years, means unified legislation for local financial regulation and supervision in the future.

Since 2017, Chinese provinces, autonomous regions and municipalities have gradually established their local financial regulatory and supervisory bureaus to enhance regulation over local financial institutions, which turned out highly effective.

But local financial regulators have different understandings about the division of regulatory and supervisory responsibilities and some financial institutions even carried out activities against the related rules, posing challenges to local financial stability.

Without unified financial regulatory and supervisory rules, coordination between different regions and cross-region supervision are out of the question despite that Hebei Province, Tianjin municipality, Sichuan Province, Zhejiang Province, Beijing, Shanghai, and Jiangsu Province all mapped out local financial regulatory rules recent years.

PBOC said in the draft regulation that it is necessary to formulate the rules to clarify local financial regulation and supervision rules and the foundation of higher law, unify supervisory standards and establish local financial supervisory frameworks with explicit responsibility division and effective enforcement.

-- Rules to be unified by the central government and implemented by local governments

As the draft rules tell, Chinese central government will unify the rules for local financial supervision and administration and Chinese local governments will be responsible for implementation of the rules.

In the principle of the body who approves and supervises related work bears the corresponding responsibility, local financial business modes of varied types are included in the unified regulatory framework to reinforce local financial risk control and treatment and prevent regional financial risks.

Dong Ximiao, chief researcher of Merchants Union consumer finance Co., Ltd. said that the significant meaning of the draft rules lies in its definition of local financial supervisory responsibility and giving local financial regulators means to perform their duties.

According to the draft rules, the financial supervision and management department of the State Council will formulate local financial supervision and administration rules and conduct business guidance over local financial regulators. The provincial governments will fulfill duties of supervision and risk treatment over local financial organizations and take jurisdiction responsibility in risk treatment related to local financial institutions with independent legal person qualifications.

The rules also provide that local financial regulators and supervisors shall carry out on-site inspection and off-site regulation and establish local financial risk monitoring and early warning mechanism.

-- Business operation with corresponding licenses by local financial organizations highlighted

In the draft rules, business operation with corresponding business licenses by local financial organizations is highlighted. 

For example, establishing regional equity market shall be announced publicly and seek public opinions by the provincial governments and reported to the securities regulatory and supervisory administration under the State Council for record filing. Setting up local financial organizations of other types shall be approved by provincial financial regulators and obtain related licenses.

With no approval, any entities or individuals shall not found local financial organizations or engage in directly or indirectly local financial businesses stipulated in the draft rules. Meanwhile, they shall not use Chinese words meaning financial, loan, financing guarantee, equity transaction or trading, pawning, financial leasing, commercial factoring, local assets management, exchanges, trading center, wealth management, equity-based crowd-funding, cooperation in the field of financing, and credit mutuality in their corporate names and business scope.

Tightening management over finance-related words in related business entity names is helpful of guarding against risks such as financial fraud and protecting wallets of the general public, added Dong. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)