PBC published "Trial Measures" on supervision and management of financial holding companies in China. The deadline for comments on this consultation is August 24, 2019. These measures have been formulated to regulate the behavior of financial holding companies, strengthen the supervision and management of financial holding companies established by non-financial enterprises, and prevent systemic financial risks.
The Measures define financial holding companies as entities that are legally established and have substantial control over two or more different types of financial institutions. As per PBC, according to the business function attributes, financial institutions include commercial banks (excluding rural banks), financial leasing companies, trust companies, financial asset management companies, securities companies, fund management companies, futures companies, life insurance companies, property insurance companies, reinsurance companies, insurance asset management companies, other financial institutions recognized by the financial management department. PBC will supervise financial holding companies provided that these companies meet certain conditions prescribed under these Measures while the financial regulatory authorities (such as CBIRC and CSRC) supervise the financial institutions controlled by financial holding companies. When the risk occurs, according to the principle of “who is supervised and who is responsible,” the corresponding regulatory body will take the lead in risk disposal.
The Measures consist of seven chapters, which cover general provisions, establishment and licensing, corporate governance and synergies, consolidated management and risk management, supervision and management, legal liability, and supplementary provisions. The Measures stipulate that a financial holding company should strengthen the management of related party transactions, its intra-group transactions with the financial institutions it controls, the financial institutions it holds, and the financial institutions and other institutions within the group, as well as with other related parties. The Measures also factor in a transition period for certain "enterprise groups" that have been already formed. At the end of the transition period, these enterprises should meet the regulatory requirements of the Measures and be checked and accepted by the respective "financial management department."
Comment Due Date: August 24, 2019
Keywords: Asia Pacific, China, Banking, Insurance, Securities, Financial Holding Companies, Systemic Risk, Financial Stability, Governance, PBC
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