China to Merge Banking, Insurance Regulators: Document

China to Merge Banking, Insurance Regulators: Document”

Functions such as drafting key regulations and prudential oversight will be transferred to the PBOC, according to the document.

China unveiled plans on Tuesday for the biggest shakeup of government in at least a decade, including the merger of its banking and insurance regulators to better handle financial risks as leaders look to address concerns over a growing debt pile.

Since the beginning of past year, Beijing has cracked down on leverage and risky market practices, with China's financial regulators releasing a flurry of new rules in an attempt to rein in risks.

"Deepening the reform of state institutions is an inevitable requirement for strengthening the long-term governance of the party", said Liu He, President Xi Jinping's top economic adviser.

The draft also includes a new immigration bureau and changes to the tax system.

China is also establishing a national market supervisory management bureau to ensure a "fair competition market environment".

"Finance is core to a modern economy and we must pay high attention to prevent financial risks and safeguard national financial security", the proposal said, adding that it is meant to fix any overlaps in regulatory oversight.

The proposed changes outlined in the document will be discussed in parliament on Tuesday, and are expected to be formally approved by the largely rubber-stamp parliament on Saturday.

There will be 26 ministries and commissions of the State Council after the reshuffle, the report said.

Compared with the current setup of cabinet administrations, the number of ministerial-level entities is reduced by eight and that of vice-ministerial-level entities by seven.

"China's whole regulatory system will change directions, from sector oversight to oversight of specific financial activities", said Betty Wang an economist at ANZ Bank. The regulators have focused on curbing the growth of wealth management products, trust products, and interbank liabilities, which fuel a vast parallel-financing industry in China.

Companies registered as banks or insurers have also started dabbling in other areas of finance with many offering complex hybrid products and making non-traditional investments.

Such regulatory arbitrage and risky cross-asset investments have anxious policymakers.

China in July a year ago announced the creation of the Financial Stability and Development Committee, and since then watchdogs overseeing banks, insurers and the stock market have intensified efforts to clamp down on shadow financing and other perceived risks.

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