A senior official from the Chinese central bank has shed light on future plans for regulation of the burgeoning fintech sector.
Speaking at the 2018 2nd China Internet Finance Forum (2018第二届中国互联网金融论坛) in Beijing on 8 December Pan Gongsheng (潘功胜), deputy governor of the People’s Bank of China (PBOC) and head of the State Administration of Foreign Exchange (SAFE), said that regulation of certain sub-sectors of the finance industry had lagged behind market developments and innovations, and that some parties “waving the banner of financial innovation” were in fact engaging in fraud or illegal fund-raising.
“Online finance and fintech have not at all changed the risk character of finance – technical, data and information security risks that accompany the internet and technology have instead become more pronounced,” said Pan.
“For this reason, internet finance and fintech need to accept stricter regulation,” said Pan.
Pan outlined four key focal areas for future regulation of China’s fintech sector:
1.Finanical activity must accept strict market regulation.
Pan said that no financial activity is permitted to deviate from regulatory systems, and warned against the use of technology to conceal financial activity.
“There must be regulatory actors with clear responsibilities and clear daily regulatory rules…[we] must prevent regulatory arbitrage, and implement thorough and consistent regulation of financial institutions, internet enterprises and fintech companies.”
2. Lawfully strike against illegal financing activities.
“Financial regulatory departments and the relevant enforcement departments cooperate closely, and over recent years we have coordinated very well with public security bureaus and provided each other with mutual support, adopting zero tolerance of illegal financial institutions and illegal financing activities, while continuing to maintain high pressure and striking hard in accordance with the law.”
3. Full application of information technology methods, and raising the technical support capability of internet finance regulation.
“Following the deep integration of finance and technology, the cycle of financial product innovation has become shorter and shorter, and its ability to cover a large volume of people has increased,’ said Pan.
“The corresponding risk accumulation and transmission speed has also expanded, making greater demands of regulation in terms of timeliness and effectiveness.”
Pan called for “advancing the normalisation of internet financial risk monitoring mechanisms, accelerating the establishment of regtech platforms, improving online financial risk early warning mechanisms, supporting the accelerated establishment of an internet financial risk technical analysis platform by the National Computer Network Safety Center (国家计算机网络安全中心) and supporting the establishment of a national internet finance monitoring platform by the National Internet Finance Association of China.”
4. Effectively employ the supplementary and support roles of industry self-regulation.
Pan said that since its establishment in 2016, the National Internet Finance Association of China had served as the national self-regulatory association for China’s internet finance sector, playing an “infrastructure role” when it came to statistics and monitoring, registration and disclosure and information sharing, as well as driving the establishment of self-regulatory standards and rules.