China may need a super watchdog for finance

New financial products fall into grey areas which could be outside the jurisdiction of the country’s three regulators

China may need a super watchdog for finance

Insurance News

By Gabriel Olano

The numerous problems besetting the Chinese financial industry, such as shadow banking, rising bad debts, bond defaults, and shoddy Internet finance have resulted in calls to integrate the country’s three financial regulators into one super watchdog.
In several press briefings held before appearing in front of the National People’s Congress in Beijing, the heads of the China Banking Regulatory Commission (CBRC), China Securities Regulatory Commission (CSRC), and China Insurance Regulatory Commission (CIRC) promised to cooperate more closely with each other to tackle the grey areas of the finance industry.
“Banks, trust companies, fund-management companies, brokerages and insurers all have asset-management businesses, but they answer to different regulators and different regulations,” Guo Shuqing, the new chairman of the CBRC, said in a press conference in late February. “There has been some chaos caused by that.”

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The CSRC estimated that a total of around RMB60 trillion (US$8.6 trillion) had been invested in asset-management products in the country as of June 2016. A good portion of those products are not included in the companies’ balance sheets supervised by regulators. The People’s Bank of China said that off-balance-sheet products issued by banks alone amounted to RMB26 trillion (US$3.7 trillion).
With the advent of various technologies such as online peer-to-peer lending, some experts fear that the traditional regulatory structure is being bypassed, which could lead to more fraud, malfeasance, and participant losses.
Chen Shujin, chief financial analyst at Huatai Financial Holdings, told Shanghai Daily that China’s finance regulatory system has a critical weak spot which could be exploited. Some technology-oriented financial schemes are being sold in a grey area of loose or no regulation.
China has been entertaining thoughts of creating a super financial regulator covering banking, insurance, and securities for at least a decade. Calls to action gathered steam in 2015 after a stock market crash, exposing cracks in the financial sector.

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