China eyes major expansion of its ‘too-big-to-fail’ rules
Sources say Chinese regulators led by the country’s central bank are set to initially shortlist at least 50 of the country’s largest lenders, insurers and brokerages as possible ‘systemically important financial institutions’
China plans to increase the number of companies it deems systemically important financial institutions (SIFI), according to sources, a sign that policymakers are stepping up crisis-prevention efforts as the nation’s debt burden swells to unprecedented levels.
They said regulators led by China’s central bank will initially shortlist at least 50 of the country’s largest lenders, insurers and brokerages as possible SIFIs.
Firms that receive the designation will be subject to extra capital requirements, and may face additional rules on leverage, risk exposure and information disclosure. Regulators currently consider about 20 banks to be systemically important, one of the sources said.
Increasing the number of SIFIs, a label commonly known as “too big to fail,” may help President Xi Jinping’s government strengthen oversight of China’s US$40 trillion financial system.
The country’s rapid expansion of lending over the past decade has provided a big jolt to global economic growth, but it has also alarmed everyone from bond-rating companies to hedge fund managers and the International Monetary Fund.