Photographer: Zhang Peng/LightRocket via Getty Images

PBOC to Boost Coordinated Oversight of Key Financial Firms

Updated on
  • Central bank also says it will curb speculative home purchases
  • People’s Bank of China issues quarterly monetary policy report

China’s central bank said it will step up coordinated oversight of systemically important financial institutions, another step toward defusing risk before a gathering of the country’s top leaders later this year.

The People’s Bank of China also said it will limit the flow of credit to speculative housing purchases and monitor how global markets are affecting funding in the financial system, according to a quarterly monetary policy implementation report released late Friday in Beijing. The report is mainly a review of monetary policy conducted in the second quarter.

"The PBOC wants to keep overall monetary conditions on the easy side but wants to exert more control on where and how liquidity gets deployed," said Michael Shaoul, chief executive officer of Marketfield Asset Management LLC in New York. "Controlling housing credit is an obvious focus, and they’re probably quite happy with the effect of mortgage curbs brought into play in specific markets over the last few months."

President Xi Jinping announced last month China would create a cabinet-level committee to coordinate financial oversight, a task currently divided among four regulators including the central bank. The meeting reinforced the PBOC’s central position in the nation’s regulatory framework, and its role in defending against risks was emphasized.

Read More: PBOC to Administer Cabinet-Level Body on Financial Oversight

Xi gathered top officials last month for a twice-a-decade National Financial Work Conference that signaled ongoing deleveraging in the financial sector could expand into the broader economy, with the debt of state-owned enterprises as the first priority. Policy makers are seeking prudent and neutral monetary policy as they squeeze out financial risk before the Communist Party Congress this fall, when some top leaders will be replaced.

"The PBOC will improve unified oversight of systemically important financial institutions and infrastructure, and push for comprehensive data collection and information sharing," the central bank said Friday. It said it will strengthen coordination in financial oversight and try to maintain control of the scale and pace of policy to stabilize market expectations.

The monetary authority also said it sees potential liquidity risks in the cash pool of wealth management products.

— With assistance by Yinan Zhao, Belinda Cao, Linly Lin, and Ludi Wang

(Uupdates with comment from bank in sixth paragraph.)
    Before it's here, it's on the Bloomberg Terminal. LEARN MORE