China Set to Release Assessment Measures for Systemically Important Financial Institutions

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The Chinese government is about to release new methods for the assessment of systemically important financial institutions according to reports from domestic media.

In November 2018 the China’s top financial authorities jointly released the “Guidance Opinions Concerning Improvements to Regulation of Systemically Important Financial Institutions” (关于完善系统重要性金融机构监管的指导意见).

The move marked the launch of efforts to better address China’s systemically important banks financial institutions, by providing a macro-policy framework for the drafting of subsequent implementation by-laws.

At the start of 2019 the Chinese central bank also released the “Three Settings Plan” (三定方案), which conferred the central bank with the responsibility of regulating systemically important financial institutions.

The Chinese central bank also included the formulation of assessment measures for systemically important banks within its work plans.

China Securities Journal reports that the Chinese government has already reviewed assessment measures for systemically important banks, and they are now set for imminent release and implementation.

While a detailed list of systemically important financial institutions has not yet been released, the Guidance Opinions released last year outlined potential benchmarks and requirements, including the identification of 30 institutions from the banking sector, 10 from the securities sector and 10 from the insurance sector.

Beijing plans to formulate special regulatory requirements for systemically important financial institutions, while relevant authorities are expected to adopt related macro-prudential regulatory measures to ensure reasonable risk-bearing capacity and prevent “blind expansion.”

Beijing will also formulate special disposal mechanisms for systemically important financial institutions; drive the formulation of recovery and disposal plans and undertake disposability assessment, in order to ensure that such institutions can be “safely, rapidly and effectively” dealt with when major risk arises, to ensure continuity of key operations and services.

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