The latest legislative work plan released by China’s banking regulator flags the introduction of 46 new statutory items over the upcoming year, as part of an ongoing crackdown on the lending sector and efforts to fill in regulatory gaps.
The plan released by the China Banking Regulatory Commission on 15 May will cover debt-to-equity swaps, capital management, wealth-management products and P2P lending, and foresees the drafting of “Commercial Bank Bankruptcy Risk Disposal Regulations.”
CBRC has revealed that new administrative regulations will also include “Financing Guarantee Company Administrative Regulations,” the “Trust Company Administrative Regulations,” the “Disposal of Illegal Fund Raising Administrative Regulations.”
According to CBRC the current round of legislative work is designed to address shortcomings in the existing regulatory framework, and prioritises the prevention of financial risk, and guarding the baseline against systemic and regional financial risk.
CBRC said to Chinese media that the some of the regulations have already been drafted, and await approval from China’s State Council or coordination with other regulatory agencies before promulgation.
Wealth management products
Wealth management products are expected to be a key area of scrutiny, given the massive contribution that the off-balance sheet instruments make to China’s burgeoning shadow banking sector.
PBOC data indicates that off-balance sheet banking assets have already reached 82 trillion yuan, with CBRC previously expressing concern about how this could impact bank provisioning as well as systemic risk in the financial sector.
In order to better address the impact of WMP’s on the financial health of lenders, Chinese central bank decided to include the instruments in its first quarter macro-prudential assessments.
Cao Yu, vice-chairman of CBRC, also indicated during the convening of the Chinese legislature earlier this year that the regulator would be drafting WMP measures for release following the issuance of asset management guideline opinions by the People’s Bank of China.
The new WMP regulations have already been drafted, with a number of substantial changes compared to versions circulated in February this year.
New bankruptcy provisions
CBRC’s latest legislative plan also flags the introduction of new provisions on the handling of banks that become insolvent.
The issue has been one fraught with dispute ever since its inclusion its inclusion in the State Council’s legislative plan in 2011, and the introduction of “Commercial Bank Bankruptcy Risk Disposal Regulations” has subsequently been the object of ongoing delays.
A key area of dispute is which regulatory agency should bear the responsibility of handling bank bankruptcies, given that a number already have mandates in relation to bankruptcy reorganisations.