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Improve the monitoring of systemically important financial institutions, protect against the big but not downside problem – Legal Network



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Xinhua News Agency, Beijing, November 27th from

Title: Completing the Systematic Importance of Financial Institutions Monitoring Preventing the problem of "big but can not fall"

Xinhua News Agency reporter Wu Yu

People's Bank of China, the China Banking Regulatory Commission and the China Securities Regulatory Commission jointly issued a document on the 27th to improve the supervision of systemically important financial institutions. On the one hand, regulators establish special rules for systemically important financial institutions to reduce the risk of major risks and, on the one hand, provide specific disposal mechanisms for systemically important financial institutions in order to properly solve the problem of "big but not down".

The international financial crisis in 2008 shows that systemically important financial institutions are important in the financial system due to its large scale, complex structures and business, and strong correlation with other financial institutions. If major risks arise, they will be on the financial system and the real economy. There are significant side effects that can trigger systemic risks. Therefore, relevant international organizations and large economies have established relevant institutional arrangements for the monitoring of systemically important financial institutions after the crisis.

"Systemic risks arising from systemically important financial institutions present many features that differ from general risks. Systemic risks are generally hidden, difficult to detect and evaluate. When systemic risks accumulate to a certain extent, they are rapidly exposed. It has become a systemic crisis and it is extremely infectious and destructive. "Dong Xiwei, senior researcher at Chongyang's financial research institute at Renmin University of China, said that China's finance industry in recent years has developed rapidly and its scale is among the highest in the world. The purpose of preventing systemic risks is difficult.

According to the relevant person in charge of the People's Bank of China, from China's situation, following rapid development in recent years, some large and highly complex financial institutions are the core of the financial system due to their high correlation with other financial institutions and the overall financial system in china. Robustness and ability to earn the real economy have important consequences. To this end, it is important to clarify the political orientation, to make institutional arrangements for the identification, monitoring and disposal of systemically important financial institutions, to fill the shortcomings in supervision and to effectively maintain the functioning of the financial system.

Which institutions can be identified as systemically important financial institutions? According to the guidance issued this time, this will be determined by People's Bank of China in cooperation with the Banking Regulatory Commission and the China Securities Regulatory Commission to determine the evaluation indicators. Primary assessment indicators include institutional size, relevance, complexity, substitutability and asset realization. After the list of systemically important financial institutions has been decided by the Finance Committee, it issues jointly by People's Bank of China and relevant authorities. The Finance Committee evaluates the evaluation process and methods every three years and makes the necessary adjustments and improvements.

Given the important position of systemically important financial institutions in the financial system, regulatory authorities will impose additional capital and leverage on them to strengthen the stability of their operations. At the same time, it requires systematically important financial institutions to improve corporate governance to promote a rational corporate culture that rationally takes risks and avoids a blind expansion.

According to the relevant person responsible for the People's Bank of China, according to the People's Bank of China, according to the nature of industry development, in cooperation with relevant departments, may add additional regulatory requirements such as liquidity and exposures of high value to financial institutions in the high-level group system.

"Stricter requirements for legislation such as capital and leverage can lead to higher costs of compliance with systemically important financial institutions, but from these institutions' position in the financial system, they should be subject to their systemic importance. Consistent monitoring." Dong Xixi said.

Recently, the Chinese Financial Stability Report (2018) published by the Central Bank pointed out that the 2008 financial crisis showed that some countries could not monitor complex financial institutions at the time and the problem of "big but not down" was outstanding, and consumers and investors were not adequately protected . Systemically important financial institutions are large in scale, complex in structure and difficult to handle. Due to the major impact on financial stability, system-critical financial institutions represent the government's expectation that it will not let it collapse and then adopt a more radical business method with high moral hazard.

In order to correct the "big but not down" problem, this guidance proposes the establishment of a special disposal mechanism for systemically important financial institutions to ensure that systemically important financial institutions fail to function safely, quickly and efficiently to ensure critical operations. And the service is not interrupted.

The responsible person in charge of the People's Bank of China introduced guiding principles to clarify the principle of disposal of the problem organization and the disposal of funds to ensure that responsibility for disposal is clearly treated during disposal. It is necessary to keep the bottom and prevent systemic risks and to comply with laws and regulations to prevent moral hazard.

In the next step, all relevant departments will actively promote relevant implementing rules as soon as possible according to the allocation of responsibility. The responsible person in charge of the People's Bank of China said that the People's Bank of China and relevant departments will consider the actual situation of China's financial institutions and impose reasonable regulatory requirements and transitional provisions in the drafting of implementing rules to avoid short-term consequences for financial institutions .

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