China announced plans to merge the two regulators responsible for its banking and insurance sectors, creating a new body with enhanced oversight of the two sectors that have a combined US$43 trillion of financial assets.
This move, the biggest overhaul in the regulation of the Chinese financial industry since the creation of the China Banking Regulatory Commission (CBRC) in 2003, is seen as part of President Xi Jinping’s campaign to curb risks in China’s financial sector.
The move is also designed to eliminate overlaps in regulatory oversight, according to a proposal submitted to the National People’s Congress yesterday as part of a reorganization of China’s State Council. The proposal aims to reduce eight ministerial-level institutions and seven vice ministerial-level agencies.
The China Insurance Regulatory Commission (CIRC), established in 1998 and overseeing RMB17 trillion (US$2.7 trillion) of insurance assets, will be merged with the China Banking Regulatory Commission that supervises over 4,000 banks with US$40 trillion in assets, according to a State Council reform plan submitted to the annual session of the National People’s Congress.
At the same time, the combined banking and insurance regulator named China Banking And Insurance Regulatory Commission, is losing some powers to the People’s Bank of China (PBOC). Certain CBRC and CIRC functions, including drafting key regulations and prudential oversight, will be moved to the PBOC, according to the proposal.
Back in January, the plan to merge the two regulatory bodies began circulating. The CIRC’s chairmanship has been vacant since its former head Xiang Junbo was removed last April amid a corruption probe.
"Finance is core to a modern economy and we must pay high attention to prevent financial risks and safeguard national financial security," the proposal said.
The PBOC adopted a "Macro Prudential Assessment" framework to better gauge risks in the entire financial system as well as the health of individual institutions. Off-balance sheet wealth management products and other shadow banking activities were later included in the Macro Prudential Assessment to give PBOC more oversight of the banking sector.