(Yicai Global) July 17 -- The Central Committee of the Communist Party of China decided at the recent National Financial Working Conference to constitute a financial ftability and development commission under the State Council.

The proposed committee will be a decision-making body, rather than a "super commission" or simply a coordinator, an insider told Yicai Global.

The two-day National Financial Conference that wrapped up on July 15 is held in Beijing every five years, typically in a year when a new National People's Congress is elected.

As the name of the new committee suggests, it is under the State Council's supervision and its order of the day will be financial stability trumps development. These factors indicate it will not be a super commission, the insider said.

Furthermore, the committee will be established directly under the State Council beyond the existing 'central bank + three commissions' regulatory framework, meaning it will be a decision-making body, rather than a coordinator, he said.

The new committee, which will comprise leading banks and the commissions, will have its own leaders and a relatively independent and complete research team, he added.

"The conference's decision  to set up the Financial Stability and Development Committee of the State Council as a centralized coordination mechanism at the level of the State Council market surprised the market," Starrock Investment Co. said in a report, noting discussions at the conference focused on "function and conduct regulation" employing the problem-driven approach, and that its decisions will effectively address the phenomenon of "regulatory arbitrage" caused by different regulatory criteria applying to the same businesses in different industries.

By introducing the financial stability and development committee, the central committee will raisw the level of financial supervision. This means relevant regulators will coordinate to effectively handle financial risks both at home and abroad, and ensure successful economic restructuring, noted Zhou Xiaoquan, president of Central China Securities.

"The National Financial Conference sent two signals. The first is that the financial industry needs to do more to support growth of the real economy. The second is that it will tighten financial supervision to prevent risks," said Sheng Songcheng, a counselor at the People's Bank of China and executive vice dean of the China Europe International Business School Lujiazui Institute of International Finance in Shanghai, in a speech yesterday.

The conference sent a clear message -- strict regulation, opined Lu Zhengwei, chief economist at China Industrial Bank. As far as financial regulation goes, the announcement's wording of the decisions highlights the importance of strict regulation. The aim is to ensure effective administration covers all aspects of the financial sector, without any regulatory vacuums or loopholes.

The Financial Stability and Development Committee of the State Council is an upgrade of the Inter-Ministerial Meeting on Financial Supervision inaugurated in 2013, updating financial regulation from the existing horizontal model to a vertical one, noted Deng Haiqing, global chief economist at JZ Securities. This implies the central bank + three commissions regulatory framework has failed to deliver the intended results, and financial regulation needs harmonization at a higher level.

Chinese President Xi Jinping attended the conference, China Central Television reported. Xi stressed government will attend more to proactive prevention and tackling systemic financial risks.

Financial regulation in China is the responsibility of four parallel ministerial bodies, the People's Bank of China (PBOC), China Banking Regulatory Commission (CBRC), China Insurance Regulatory Commission (CIRC) and China Securities Regulatory Commission (CSRC), with their respective bailiwicks divided per the industry they regulate.