The National Internet Finance Association of China (NIFA) has called for the establishment of a multi-tier fintech regulatory system in order to better prevent financial risk.
NIFA head Li Dongrong (李东荣) said that China should establish a “five-in-one” fintech regulatory system comprised of legal restraints, administrative regulation, industry self-discipline, institutional internal controls and public monitoring.
Li made the remarks during a speech on expediting the healthy development of fintech at the 3rd Global Fintech Summit in Beijing.
According to Li fintech is currently at a stage of continuous development and maturation, which will lead to the emergence of new challenges that necessitate the creation of a multi-tier regulatory system.
Li outlined a fintech regulatory system consisting of:
i) Strict legal restraints.
Li called for new laws to compensate for existing or potential defects in the regulatory system.
ii) Strengthened administrative regulation.
Coordination should be strengthened between financial regulators as well as central and local government regulators, to form “comprehensive, long-term effective regulatory mechanisms for fintech risk.”
iii) Strengthened industry self-discipline.
Li said that industry self-discipline has the advantage of reducing communication costs between government and the market, providing an “organic support” to administrative regulation.
iv) Effective internal controls.
According to Li fintech institutions themselves should serve as the “first firewall” against risk by raising their own risk prevention awareness and improving internal corporate governance.
v) Deeper public monitoring.
Li said that channels for submitting complaints or filing lawsuits should be more convenient and accessible, while legal, accounting and credit assessment bodies should be encouraged to engage in specialist oversight.
The remarks from the NIFA head arrive just as a senior official from the China Banking and Insurance Regulatory Commission (CBIRC) warned that Chinese fintech has entered an era of high-risk exposure.
China took second place in the world for fintech investment in the first half of 2018, as both established banks and start-ups vie for a share of the burgeoning market.