New Banking Insurance Regulator’s First Directive Targets Financial Guarantee Firms

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The newly formed China Banking and Insurance Regulatory Commission has just released its inaugural directive, in the form of a set of regulations concerning financial guarantee companies.

On 9 April CBIRC released the “Notification Concerning the Release of the Four Accompanying Systems for the ‘Financial Guarantee Company Regulatory Administrative Regulations'” (关于印发《融资担保公司监督管理条例》四项配套制度的通知).

The Notice concerns the four regulatory systems that CBIRC will draft and release in conjunction with other key organs of the Chinese central government as mandated by the Administrative Regulations.

These four regulatory systems are the “Financial Guarantee Business Licensing Administrative Measures” (融资担保业务经营许可证管理办法), the “Financial Guarantee Liability Balance Calculation Measures” (融资担保责任余额计量办法), the “Financial Guarantee Company Asset Ratio Administrative Measures” (融资担保公司资产比例管理办法) and the “Banking Sector Financial Institution and Financial Guarantee Company Business Cooperation Guide” (银行业金融机构与融资担保公司业务合作指引).

The “Financial Guarantee Business Licensing Administrative Measures” have the goal of standardising the administration of businesses licenses for financial guarantee operations, expediting the lawful operation of financial guarantee companies, as well as maintaining the “order” of the financial guarantee market.

“The Financial Guarantee Liability Sum Calculation Measures” have the goal of standardising the business activities of financial guarantee companies, risk prevention, and accurately calculating financial guarantee liability sum.

The “Financial Guarantee Company Asset Ratio Administrative Measures” are intended to guide financial guarantee companies in focusing on their primary operations and prudential management, as well as ensuring that financial guarantee companies maintain ample proxy repayment capability, and prioritise asset liquidity and security.

The “Banking Sector Financial Institution and Financial Guarantee Company Business Cooperation Guide” aims to standardise cooperation between banking sector financial institutions and financial guarantee companies, and maintaining the lawful rights and interests of both parties.

CBIRC’s official placard and website were launched over the weekend, following the State Council’s announcement of the decision to merge the banking and insurance regulators at China’s Two Sessions in March.

The move is considered to be the biggest shake up of China’s financial regulatory framework in over fifteen years, with officials hoping that it will improve coordination and efficiency, as well as help to stamp out regulatory blanks and regulatory arbitrage.

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