Former Chinese finance minister Lou Jiwei attacks regulators for ‘failure’ to act over risk

Lou tells forum that central bank had not acted to tackle problems and warns mounting debt threatens the economy

Collapse of Baoshang Bank and recent bond defaults cited as examples of poor oversight

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Luo warned that mounting debts threatened the economy. Photo: AFP

Published: 8:00pm, 20 Dec 2020Updated: 11:09pm, 20 Dec 2020

China’s former finance minister Lou Jiwei has criticised the country’s financial regulators, saying they had ignored systemic risks.

In a speech made at the China Wealth Management 50 Forum in Shenzhen on Sunday, Lou highlighted a number of regulatory failures in the supervision of banks and bond markets and warned the country’s mounting debt threatened the economy.

He said the country’s central bank had not taken precautions against systemic risks, citing its handling of the collapse of Baoshang Bank last year and the recent bond defaults of a number of state firms as examples of poor regulatory oversight.

“According to the current institutional arrangements, the People’s Bank of China is responsible for prudent supervision, but it obviously failed to take preventive measures before and after – for example, the reports on the bankruptcy of Baoshang Bank, which was rescued by 170 billion yuan [US$26 billion] from the deposit insurance fund,” Lou said, according to a transcript published on the news portal Sina.com.

“Baoshang Bank has long had serious problems with key issues such as governance structure, asset quality, capital adequacy ratio, etc. [The bank had been] ignoring it and the risk just broke out.”