CBIRC Issues Draft Version of Amended Banking Regulation Law

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The China Banking and Insurance Regulatory Commission (CBIRC) has made significant amendments to a key banking regulation law.

On 11 November, CBIRC released the draft of an amended version of the “People’s Republic of China Banking Sector Supervision and Regulation Law” (中华人民共和国银行业监督管理法) for the solicitation of opinions from the public until 11 December.

CBIRC said that the amendments were for the purpose of “strengthening and improving modern financial regulation and raising the transparency and rule-of-law levels of financial regulation.”

“In recent years, following the continued deepening of external opening and innovation of the banking sector, the scale of assets of banking sector financial institutions has continued to grow, and the level of financial marketisation has continually risen,” CBIRC said.

“Certain provisions of the law are comparatively outdated, and there are blank spots for certain key areas, making it difficult to satisfy the needs of regulatory implementation.”

These areas of inadequacy include:

  1. Insufficient regulation of key shareholders and actual controllers of banking sector financial institutions, and insufficient basis for regulation and subsequent punishments.
  2. Provisions in relation to risk disposal and market withdrawal of banking sector financial institutions are excessively principle based; outstanding problems including inadequate early-intervention mechanisms and a lack of effective disposal instruments.
  3. Low cost for legal breaches by financial institutions. Banking sector activities in breach of laws and regulations are becoming increasingly complex, and the liability scope of existing laws is inadequate, while punishments are insufficient and inspection methods are too uniform.

According to CBIRC key goals of the amendments include:

  • Preventing and dissolving financial risk.
  • Raising effective overall regulatory targets.
  • Supplementing shortcomings in regulation.
  • Strengthening the intensity of regulation.
  • Clarifying authorisations and focal points for regulation.
  • Summarising and consolidating the experiences and fruits of reform of banking sector regulatory experience from the past several years.
  • Better employing the rule of law in stabilising expectations and benefiting the long-term.
  • Pragmatically lifting the modernisation of the financial regulatory system and financial regulatory capability.