China's National Financial Work Conference Is Likely to Coordinate Financial Oversight
Xu Yanyan
/SOURCE : Yicai
China's National Financial Work Conference Is Likely to Coordinate Financial Oversight

(Yicai Global) July 13 -- China's National Financial Work Conference, a meeting of regulators and policymakers staged every five years, may be held in mid-July.

This year's meeting is expected to focus on improving the mechanism of coordinating financial oversight, insiders told Yicai Global.

This will probably not mean a consolidation of the People's Bank of China (PBOC) and the nation's three main regulatory bodies including the China Banking Regulatory Commission (CBRC), the China Securities Regulatory Commission (CSRC) and the China Insurance Regulatory Commission (CIRC) as the market has speculated, but the establishment of a regulatory coordination agency with great authority.

The financial work conference will set a slew of major financial reform policies and directions for the next step and produce significant measures, including financial and institutional reforms, experts predict.

"Financial security and financial regulation would be the top priority of this meeting," said Jiang Chao, chief economist at Haitong Securities Co. [SHA:600837].

"The meeting will focus more on financial security and warding off financial risks and achieving progress in improving financial supervision, regulating financial innovation and eliminating regulatory arbitrage," said Li Huiyong, chief macro analyst at the Research Institute of Shenwan Hongyuan Securities. "The meeting will also further promote financial reform and opening up while emphasizing the dynamic balance between financial regulation and real economic development," he added.

On the issue of whether the meeting will decide to create a 'super-regulator,' Li predicted that a consolidation of the PBOC, CBRC, CSRC and CIRC is unlikely, adding that a more reasonable solution would be to establish a new office to coordinate these four regulatory agencies by giving it an overarching function.

"The focus will rest on business supervision to compensate for the lack of entity supervision and adopting uniform regulation to address the shortcomings of compartmentalized regulation," Li said.

Jiang also believes that coordination will be strengthened based on separate regulation and regulation of functions and actions will be increased.

"Under the existing model of separate regulation, inadequate coordination could easily lead to under-regulation. The introduction of function regulation and behavior regulation may help solve the problem of under-regulation caused by business overlap between agencies and help reduce regulatory arbitrage and 'hide-and-seek' situations between financial institutions and regulators," said Jiang.

"Risks manifesting themselves earlier, such as a stock-market plunge, expose the disadvantages of a lack coordinated financial supervision in China," Li said.

As an important area of regulatory coordination, the long-rumored uniform standards for the asset management industry may be made clear at the meeting.

Rumors swirled earlier this year that, led by the PBOC, the CBRC, CSRC and CIRC are working on uniform standards for the asset management industry. Top officials from various regulatory agencies confirmed this information.

Four meetings of the National Financial Work Conference have thus far convened. Except for the first meeting held in late 1997, the rest all met at the start of a year of leadership transition. All indications point to this year's meeting taking place in July.


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Keywords: MSCI , Coordination , Central Bank , CBRC , CSRC , CIRC , Financial Safety