PBC released the 2019 China Financial Stability Report, which gives a comprehensive view of the soundness of the financial system in China since 2018. The report highlights that the financial sector in China has upheld the underlying principle of pursuing progress while ensuring stability. Overall, the financial risks, which have been rapidly building up over the past years, are being mitigated gradually while the existing financial risks are being resolved in an orderly manner. Financial markets are stable, financial regulatory rules have been further improved, and systemic financial risks have been forestalled.
The report highlights that after over a year of rectification and with multiple measures taken, preventing and defusing financial risks made headway so that the macro leverage ratio was effectively stabilized. Institutions with high risks, such as Baoshang Bank, were dealt with in a stable, orderly manner. Vigorous measures were taken to straighten out financial order so that existing risks were reduced steadily. Local, structural liquidity risks of small and medium-size banks were tackled prudently, while bond defaults of private enterprises were handled step by step. New rules on asset management were rolled out and guidelines for the regulation of systemically important financial institutions were released to shore up the institutional weaknesses of regulation. The Chinese economy remains highly resilient, as the operation of major financial institutions is sound and stable and macro policy instruments and regulatory mechanisms are adequate.
The report also mentions that financial risks have begun to show new features and new trends of evolution. While incremental risks related to institutions of special concern and all sorts of illicit financial activities have been contained effectively, more work needs to be done to resolve existing risks. As financial markets are highly sensitive to external shocks, the risks of abnormal market fluctuations should be closely watched. According to the report, in the past year, under the command and coordination of the State Council Financial Stability and Development Committee, PBC worked with other concerned agencies to apply tailored policies to different risks.
To address the problem of institutional inadequacy, sustained efforts were made to advance regulatory reform and shore up regulatory weaknesses. PBC strengthened routine risk monitoring and assessment and ensured that contingency plans for the resolution of different risks were put in place. Meanwhile, in defusing and resolving risks, PBC focused on the pace and intensity of policy implementation while carrying out preemptive adjustment and fine-tuning as needed. Work was also done to prevent risks that may arise from risk resolution. As a result, the stable operation of financial markets and financial institutions was effectively guaranteed.
Keywords: Asia Pacific, China, Banking, Securities, Financial Stability Report, Systemic Risk, Liquidity Risk, Resolution Framework, PBC
Previous ArticleSEC Finalizes Requirements Under Regulatory Regime for Swaps
EBA published an erratum for the technical package on phase 2 of the reporting framework 3.0.
MAS amended Notice 643A that addresses requirements for banks to prepare statements of exposures and credit facilities to related concerns or parties.
ECB has published, in the Official Journal of the European Union, the Guideline 2021/565 on the euro short-term rate (€STR) and this guideline amends the previous ECB Guideline 2019/1265.
EBA launched a consultation on the draft regulatory technical standards on the list of countries with an advanced economy for calculating the equity risk under the alternative standardized approach (FRTB-SA).
PRA is proposing, via CP7/21, the approach to implementing new requirements related to the specification of the nature, severity, and duration of an economic downturn in the internal ratings-based (IRB) approach to credit risk.
The UK government launched the Recovery Loan Scheme (RLS) as part of its continued COVID-19 support for UK businesses, as announced by HM Treasury on March 03, 2021.
FSB published a letter, from its Chair Randal K. Quarles, to the G20 Finance Ministers and Central Bank Governors, ahead of their virtual meeting on April 07, 2021.
OSFI issued a letter to the deposit-taking institutions issuing covered bonds and announced the unwinding of the temporary increase to the covered bond limit for deposit-taking institutions, effective immediately.
To support recovery from the COVID-19 crisis, EU has published two regulations to amend the securitization framework, as set out in the Securitization Regulation (2017/2402) and the Capital Requirements Regulation or CRR (575/2013).
HM Treasury announced that G7 Finance Ministers and Central Bank Governors met ahead of COP 26, the 2021 UN Climate Change Conference, and agreed on green agenda.