China boosts supervision of key financial institutions

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China's central bank has published guidelines to improve the supervision of the country's most influential financial institutions.

The guidelines, posted Tuesday on the website of the People's Bank of China (PBOC), aims to improve the framework for supervising systemically important institutions, prevent systemic risks and maintain the prudent performance of the financial system.

"[The guidelines] specify the policy orientation for supervision of systemically important financial institutions, improve areas of weakness in financial supervision, give guidance to large financial institutions on prudent operations and forestall systemic financial risks," the PBOC said.

The guidelines were jointly released by the central bank, the China Banking and Insurance Regulatory Commission and the China Securities Regulatory Commission.

The People's Bank of China headquarters in Beijing /VCG Photo

They also made clear the definition and scope of such financial institutions, including those in the banking, securities and insurance sectors, as well as the evaluation procedure and method.

Systemically important financial institutions refer to those that will exert major negative impacts on the financial system and real economy and may lead to systemic risks in the case of failing to continue operations due to the occurrence of major risk events, the guideline said.

They will be subject to special supervision requirements to enhance the capability of sustained operations and reduce major risks. Meanwhile, the country will set up a special disposal mechanism to ensure safe, fast and effective disposal when major risks occur, it added.

To forestall and defuse major risks is one of the three tough battles facing China, together with targeted poverty alleviation, and prevention and control of pollution, according to the 19th National Congress of the Communist Party of China.

Source(s): Xinhua News Agency