China has established a countercyclical capital buffer mechanism to diversify the macro-prudential policy toolbox, said the country's central bank and banking and insurance regulator on Wednesday.

The mechanism takes effect from Wednesday, according to a statement on the People's Bank of China (PBOC) website.

The two departments will regularly assess and adjust the countercyclical capital buffer requirements to prevent systemic financial risks upon comprehensive consideration of the macroeconomic and financial situation, leverage ratio level, stability of the banking system, and other factors, read the statement.

The mechanism will further promote the sound operation of financial institutions in the banking sector and enhance the countercyclical adjustment capacity of macro-prudential policies, the statement noted.

It will also help to mitigate the negative impact of pro-cyclical fluctuations and sudden shocks of financial risks, and maintain the stable operation of China's financial system, said the statement.

In the battle against the COVID-19 pandemic, the country has pledged countercyclical adjustment efforts to keep market liquidity at a reasonably ample level in order to keep economic growth stable, including providing relending funds and credit support.

The move also echoes China's goal of promoting stable performance in six key areas, namely, stability in employment, finance, foreign trade, foreign investment, domestic investment, and market expectations.

(With input from Xinhua)