Tokyo / AFP
As China’s leaders consider ways to improve market oversight and avoid the kind of boom and bust in equities that shook investors around the world last year, the nation’s central bank is already extending its oversight to areas beyond its traditional focus.
The People’s Bank of China (PBOC) this month expanded its powers to cap cross-border capital flows by adding controls for banks and companies to its new Macro Prudential Assessment system.
The risk-monitoring system announced in December was expanded just one month later to include bonds, equities and off-balance sheet assets held by commercial banks, giving the central bank authority that was once the turf of the banking regulator.
The PBOC is also spreading its tentacles regionally, saying last month it plans to again re-establish a robust provincial-based bureau structure that was abolished in 1990s so it can better gauge conditions on the ground.
The goal; to consolidate risk monitoring so problems in banks or markets are spotted before they blow up and do real economic damage.
China’s need for better oversight of its bubble-prone markets and improved communication of policies was plain to see last year, when a $5 trillion stock-market collapse and shock currency devaluation rattled global investors.
Authorities are considering convening a top-level finance work conference this summer — a year ahead of schedule — to map out a sweeping consolidation of the financial regulatory system, it was reported last month.
The PBOC has an “upper hand” in any shake up because of its broad mandate to maintain financial stability, according to Zhu Ning, the deputy dean at the Shanghai Jiao Tong University’s Advanced Institute of
Finance in Beijing and author of the book “China’s Guaranteed Bubbles,” which examines China’s rising debt threat.
Zhu said there are two likely outcomes from the regulatory revamp: the PBOC emerges as the key coordinating regulator, or a new super regulator is created to work alongside the PBOC.
The PBOC-led option has the advantage of being clearer and more effective, according to Zhu, by avoiding the potential for conflicting policies or loopholes that could be exploited by other parties.
Spokespeople for the PBOC and the securities, banking and insurance regulators didn’t immediately respond on Tuesday to faxed requests for comment on the regulatory changes.
The central bank’s governor Zhou Xiaochuan criticised the local regulatory system at a Group of 20 meeting in Shanghai in February, saying its performance through the financial turmoil of 2015 was unsatisfactory and the shake-up should be coordinated with the new macro prudential framework in mind.