China's financial regulatory system is set to go through sweeping reforms, with plans to set up a new national financial regulatory administration.

The proposed body will fall directly under the purview of the State Council, and will be in charge of regulating the whole financial industry, except the securities sector. 

The banking and insurance watchdog, China Banking and Insurance Regulatory Commission (CBIRC), will no longer exist and will be absorbed into this new outfit.

Certain functions of the People's Bank of China (PBOC) and the China Securities Regulatory Commission (CSRC), such as oversight over financial holding companies, financial consumer protection and investor protection, will be transferred to the new administration.

Unlike the CBIRC, the CSRC, which is also a commission, is being retained, and will continue to oversee the securities and futures markets. However, it will be turned into a government agency, rather than a public institution, directly under the State Council.

So, why is China making those changes?

PBOC Governor Yi Gang had previously said that the proposal was designed to "make China's financial system more complete" and further improve management efficiency.

The overall plan signifies that China's financial system would be much safer and emphasizes a high level of opening-up, said Yi earlier this month, according to a report by The Paper.

According to the plan, the PBOC will cut its county-level branches in a move to deepen the reform of its local financial regulatory mechanism.

To do that, China will develop a local financial regulatory mechanism with agencies dispatched by central financial regulators as the mainstay, said the plan. 

The institutional structure and resources of these dispatched agencies will be optimized in a coordinated manner.

With all those changes being implemented, the upcoming financial regulator will regulate the market at the micro level, while the PBOC will oversee macro-level risks.

(With input from Xinhua)