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
Across 35 years in banking, Blake has gained deep insights into the inner working of this sector. Over the last two decades, Blake has been an Operating Committee member, leading teams and executing strategies in Credit and Enterprise Risk as well as Line of Business. His focus over this time has been primarily Commercial/Corporate with particular emphasis on CRE. Blake has spent most of his career with large and mid-size banks. Blake joined Moody’s Analytics in 2021 after leading the transformation of the credit approval and reporting process at a $25 billion bank.
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