Establish a long-term mechanism for maintaining financial stability

2022-05-31 0 By

A draft of the Financial Stability Law of the People’s Republic of China was published on April 6.The draft consists of six chapters and 48 articles, which are divided into general provisions, financial risk prevention, financial risk mitigation, financial risk disposal, legal liability and supplementary provisions.It will promote the establishment of institutional arrangements for preventing, resolving and dealing with financial risks, which will complement other financial laws with different focuses and effectively safeguard national economic and financial security and social stability, said a person concerned.Compaction relevant personage introduces the People’s Bank of China, the responsibility for the implementation of the party central committee and state council on preventing defuse financial risks and improve the financial decision deployment under the rule of law, to establish a long-term mechanism of maintaining financial stability, together with the relevant departments of the people’s bank of in-depth study, repeated demonstration, drafted the financial stability of the People’s Republic of China law draft (draft) “.”Both at home and abroad, financial development and regulation should be based on financial stability.”Wen Bin, chief researcher of China Minsheng Bank, told reporters that in recent years, China’s financial legislation has made steady progress, but there are still deficiencies in the construction of financial rule of law.Especially in financial stability, the lack of overall design and cross-industry and cross-sector overall arrangements, the relevant provisions scattered in several financial laws and regulations, the provisions are too principled, some important issues are still lack of institutional norms, has become the impact of financial security and stability and constraints.From a practical point of view, China has achieved important progress in the critical battle to prevent and defuse major risks, and financial risks are generally converging and under control. It is necessary to upgrade the effective practices into a long-term legal system.The personage inside course of study says, the early treatment of practice shows that some small and medium-sized financial institutions corporate governance failure, extensive management mode, and some of the shareholders and actual controllers control power abuse and illegal occupy huge sum funds of financial institutions, is one of the important reasons lead to financial risk occurs, the local government of liability and the regulation of the financial regulators also need to further implement and strengthen.The published draft for comments clearly puts forward that the main responsibility of financial institutions and their major shareholders and actual controllers should be consolidated, the prudent operation obligations of financial institutions should be strengthened, and the access and supervision requirements for major shareholders and actual controllers should be strengthened.Local governments should consolidate their territorial and stability responsibilities and take the initiative to defuse regional financial risks in a timely manner.Financial regulatory departments should consolidate their regulatory responsibilities, earnestly fulfill their responsibilities for the prevention and control of financial risks in their own industries and fields, and strictly guard against, rectify early and deal with risks in a timely manner.The People’s Bank of China plays the role of lender of last resort to guard against systemic financial risks.Reducing dependence on public funds Addressing financial risks requires the commitment of financial resources.Wen Bin introduced that since 2008, international organizations and major economies have emphasized that financial institutions should first rescue themselves and then take external assistance to deal with risks, reducing dependence on public funds.The draft for public comments clearly proposes to establish a disposal fund pool, and make clear that rights, responsibilities and interests are matched, fair and orderly disposal fund arrangements.”First of all, the disposed institution is required to actively self-rescue the risk, the major shareholders and actual controllers shall replenish capital in accordance with the recovery and disposal plan or regulatory commitment, and the shareholders and actual controllers responsible for financial risks shall fulfill their self-rescue obligations in accordance with the law.”The People’s Bank of China said that at the same time, market-oriented funds will be mobilized to participate in the merger and reorganization of the disposed institutions, and the deposit insurance fund and industry guarantee fund will play a role of market-oriented and law-based disposal platform.The draft also proposes that local public resources should be used in accordance with the law if regional stability is endangered and the risks are still difficult to be resolved by using market-oriented means and strictly implementing the asset recovery and loss reduction policy.If major financial risks threaten financial stability, the financial stability guarantee fund shall be used in accordance with regulations.The FINANCIAL Stability Guarantee Fund is made up of funds raised from financial institutions, financial infrastructure and other funds stipulated by The State Council and managed by the Financial Commission of The State Council, the PBOC said.When necessary, the People’s Bank of China and other public funds may provide liquidity support for the fund, and the Fund shall repay the reloan with the disposal proceeds, earnings and industry charges.The Financial Stability Guarantee Fund (FSF) operates in tandem with the existing deposit insurance fund and industry guarantee fund to further strengthen China’s financial safety net.In addition to the newly added funds for disposal instruments, the draft for comments makes clear arrangements for financial risk disposal measures and instruments, including the overall transfer of assets and liabilities, the establishment of bridge banks and special purpose vehicles, and the suspension of netting and other disposal instruments.According to the market-oriented and law-based principle, the People’s Bank of China has made it clear that the disposed institutions can carry out equity and creditor’s rights write-downs and debt-to-equity swaps in accordance with the law, and share the disposal costs.Make clear the order of write-down of equity and creditor’s rights, protect the legitimate rights and interests of shareholders, creditors and relevant stakeholders, and make clear that the income of creditors and relevant stakeholders from risk disposal shall not be lower than the income from bankruptcy liquidation.We will improve the supporting systems and arrangements for handling cases and keep them connected with judicial procedures.In the aspect of legal liability, the draft draft emphasized that the country’s financial stability development overall coordination mechanism of major financial risk formation, expand, spread, or improper disposal of directly responsible of the local governments, departments and units and individuals concerned, can take interview, internal report, shall be ordered to make a written examination measures such as accountability.”We will strengthen accountability for violations of laws and regulations.”The People’s Bank of China (PBOC) said that financial institutions and their major shareholders and actual controllers should be held criminally responsible if they commit crimes in the formation and disposal of financial risks.Any dereliction of duty or dereliction of duty committed by a public official shall be dealt with and punished according to law.The People’s Bank of China said that it will work with relevant departments to fully absorb the comments and suggestions from all sectors of society, further revise and improve the draft financial stability Law, and cooperate with the legislature to promote high-quality follow-up work in accordance with the legislative procedures, so as to promote the early introduction of the financial stability law.(Reporter Qiu Haifeng)