The Chinese central government is reviewing a proposal to amalgamate the banking and insurance regulators according to anonymous sources speaking to the South China Morning Post.
According to the sources the proposed move would see the China Banking Regulatory Commission (CBRC) and the China Insurance Regulatory Commission (CIRC) merged into a single agency, as part of efforts to improve regulatory coordination and contain systemic financial risk.
The sources said to that following the merger the Financial Stability and Development Committee would sit at the apex of China’s revamped regulatory system, overseeing the Chinese central bank, the China Securities Regulatory Commission and the newly formed banking and insurance regulator.
CSRC would be responsible for supervising the market, while the merged banking and insurance regulator would be entrusted with monitoring institutions.
Bloomberg previously reported in January that the Chinese Communist Party’s central reform group had directed government agencies to draft a plan for combining CBRC and CIRC under a single head.
The proposed move could significantly streamline China’s efforts to deleverage the economy and combat the growth of the shadow banking sector, given the extensive involvement of lenders and insurance companies in both.
Should the merger proceed, it will mark the biggest overhaul of the financial regulatory system since the establishment of CBRC in 2003, as part of efforts to fulfil commitments made by Beijing to the World Trade Organisation after joining in 2001.
Beijing has not made any official announcements on the matter, but a statement issued following the 3rd plenary session of the 19th Central Committee of the Chinese Communist Party would imply that amalgamation plans are afoot.
“The institutional and function settings of the party and the state…are not fully up to the demands of modern state governance,” said the statement.
Guo Tingyong, a banking expert from the Central University of Finance and Economics in Beijing, said to SCMP that the merger could help to correct inefficiencies in China’s financial regulatory framework.
“There are problems with the existing regulatory structure,” said Guo. “Each regulator acts on its own…resulting in big loopholes and rampant regulatory arbitrage.”
CBRC is currently headed by Guo Shuqing, who is considered a leading candidate for the position of central bank head once Zhou Xiaochuan retires.
CIRC has been headless since April 2017, after former chair Xiang Junbo was placed under investigation by the central government for infractions of party discipline.