China's super regulator plan may merge banking, securities & insurance sectors

By Staff Writer

Mar 01, 2016 03:48 AM EST

The world's second largest economy will have its new financial super-regulator very soon. Considering the growing concerns about market stability and weakening investor confidence, the Chinese government is in the process of appointing a new financial super-regulator. China is working on creating one regulatory entity for banking, securities and insurance sectors.

The ongoing sluggish stock markets are propelling the Chinese government to revamp its financial monitoring mechanism as its previous one was considered to be ill-adapted and not adhering to ground realities. 

Bloomberg reports that the Chinese government has been doing a lot of brain storming over a proposal to merge regulators from banking, securities and insurance segments into one. China is very keen on new financial regulatory system and the appointment of regulator. People's Bank of China (PBOC) will have more powers to oversee the economy. 

Discussions are going on how to create a single entity for banking, securities and insurance segments. The creation of single super regulatory body will handle the functions of all the three segments. 

The country's government has been seeking a more open financial system to tackle economic slowdown after last summer witnessed a massive sell off of $5 trillion stocks and several financial scams. The introduction of circuit breakers in the stock market has further increased pressure on regulators. Chinese currency Yuan is also falling continuously since December 2015 recording its longest run of decline.

Chinese markets tumbled on last weekend just days after the appointment of Liu Shiyu as the new Chairman of China Securities Regulatory Commission (CSRC). A senior official at CSRC opined that it's challenging to find out the best supervisory path in the country. The market has been divided between small and big players, a totally different one from that in the US, as reported by South China Morning Post.

Highlighting the lack of coordination in the fragmented system, Hu Xingdou, an economics professor at the Beijing Institute of Technology, said "This should have been done a long time ago. Under a fragmented system, each regulator is going its own way. There's a lack of coordination and sharing of data, it's bureaucratic and there's a lot of overlap."

The recent lapses in financial system led to different standards for capital requirements and entry norms for business operated by various institutions. Internet finance is another example. As per rules framed in July 2015, the central bank has to supervise online payments, while China Banking Regulatory Commission oversees internet lending, trusts and consumer finance. 

Recently, the Chinese government replaced Xiao Gang, Chairman of China Securities Regulatory Commission, with Liu Shiyu, Chairman of Agricultural Bank of China. The latest turmoil in financial markets led to the dismissal of Xiao. Investors were not surprised, however, over the change at top position of CSRC as Xio managed to remain in his position for long, according to CNBC

The securities regulator was to handle equity crowd-funding and online fund sales. This multiplicity and complex structures have created competition among regulators resulting in overlapping supervision with a territorial mindset.

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