A regulatory commission will soon be created under the central bank in a move to streamline the regulatory oversight of the country's banking industry, state media reported. The decision was mooted during the three-day Central Financial Work Conference in Beijing, following a heated debate among top leaders, central bankers and chiefs at commercial banks and other financial institutions, Xinhua news agency reported. The conference, which ends today, accepted that keeping the agency under the People's Bank of China (PBOC) would give it proper authority to implement policy, the state media said. Reforms and regulations of the banking sector topped the conference's agenda. Premier Zhu Rongji was quoted as saying that China wanted development but not without regulation. One banking official said: 'The decision to form a PBOC controlled regulatory body means that the controversial option of setting up a regulatory body independent from the central bank has been rejected.' There has been fierce debate over whether Beijing should form an independent regulatory commission merging China Securities Regulatory Commission and China Insurance Regulatory Commission to supervise the banking and financial sector. Supporters said a new regulatory commission would make the bank more functional and that the central bank's prime responsibility should focus on monetary policy rather than regulatory role. Another proposal was to maintain the existing system without changes. Yesterday, Xinhua quoted State Council officials as saying a commission under the PBOC was the most feasible and cost-effective option. One PBOC official said monetary policy-making and banking supervisory roles needed a lot of information from banks and that the two functions could be performed more efficiently with central bank involvement. Another banking official said the creation of the new regulatory commission was a compromise among the various reform plans put forward. UBS Warburg economist Vincent Chan said the decision to set up a PBOC-controlled regulatory body meant that Beijing was not ready to allow financial institutions to operate comprehensive financial businesses. That was why the Government did not need a new regulatory body to overlook the entire sector. Beijing has adopted a regulatory demarcation for its financial industry since 1995, allowing financial institutions to specialise in only one business. Banks, for example, are allowed to operate only banking services. One official said the central bank had been tightening supervision by forming another department to regulate the sector. 'The new department was formed in the second half of last year, aimed at increasing regulation over the sector,' he said. Already, the central bank has two departments monitoring state-owned commercial banks and shareholding commercial banks. Mr Chan said the scope of the conference was smaller than expected. 'The market had expected an overview of development strategy in the entire financial sector including insurance and securities. The meeting did not touch on the topic of rural financial system, which had been expected as part of the agenda,' he said. Instead, the conference focused on reform and supervision of the banking sector, particularly state-owned commercial banks as Beijing pushes financial institutions to cut bad loans, and improve management and corporate governance. Analysts believed that China's securities markets would also be discussed.