PBOC Researcher Suggests Single Regulator for Financial Markets

  • Folding agencies into central bank to boost cooordination: Bu
  • Caixin article follows Premier Li's criticism of regulators

China should fold the agencies which oversee securities, insurance, banking and foreign exchange into the central bank to create a unified financial markets regulator, a People’s Bank of China researcher wrote in an article posted on Caixin magazine’s website.

This will help coordinate monetary policy with financial and currency regulations and enhance the government’s ability to identify systemic risks, according to Bu Yongxiang. The article follows the replacement of the head of the China Securities Regulatory Commission earlier this month after criticism that he mismanaged last year’s equities slump.

The Shanghai Composite Index has plunged 18 percent since the start of this year, and policy makers were forced to abandon a new circuit-breaker system after it was triggered in the first week of January. The government is considering a plan to combine the three regulators that oversee securities, insurance and banking, people familiar with the plan told Bloomberg last month.

Chinese Premier Li Keqiang last week became the most senior official to criticize regulators’ reactions to the market turmoil, saying at a State Council meeting that they didn’t respond actively to declines. Li didn’t specify which regulators, and defended the decision to intervene in markets as necessary to head off systemic risks, according to a Beijing News report carried on the government’s website.

Although China’s regulatory system has improved significantly since the 1997 Asian financial crisis, it isn’t suitable to more modern financial markets and to technology development, Bu wrote in the Caixin article.

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