China’s draft financial stability law takes aim at ‘scattered’ rules governing systemic risks
- The People’s Bank of China (PBOC) says existing legal framework ‘lacks overall design and cross-industry and cross-departmental arrangement’
- New law will be ‘credit positive’ for Chinese financial institutions because it will provide a legal framework to reduce risks, Moody’s Investors Service says
China is edging closer to enacting a financial stability law that would fix the “scattered” set of rules currently used to handle financial risks.
The central bank said the existing legal framework “lacks overall design and cross-industry and cross-departmental arrangement”, while the relevant provisions are “scattered” and “too much about principles”. There were also clear holes in financial stability regulations.
A new financial stability and development committee under China’s State Council, led by Vice-Premier Liu He, would play a key role in overseeing the sector, but different ministries would also have responsibilities, the draft rules said.
Chen Long, co-founder and partner of Beijing-based research firm Plenum, said much of the draft law has already been put into practice.