Event:
The people's Bank of China solicited public opinions on the financial stability law of the people's Republic of China (Draft for comments).
Comments:
Background: there are deficiencies in the current construction of financial rule of law
The central economic work conference held at the end of 2021 and this year's government work report mentioned that preventing and resolving risks has become an important part of current economic development. In recent years, China's financial legislation has made steady progress, forming a multi-level financial legal system under the guidance of basic financial laws such as the people's Bank of China law, commercial banking law, securities law and insurance law. The central bank said that due to the lack of overall design and cross industry and cross sectoral overall arrangement of the legal system related to financial stability, the relevant provisions are scattered, the provisions are too principled, and some important issues still lack institutional norms. Therefore, it is necessary to specially formulate the financial stability law and establish institutional arrangements for financial risk prevention, resolution and disposal, which have their own emphases and complement each other with other financial laws.
Impact: improve the ability of systemic financial risk prevention and control
The draft financial stability law points out that the goal of maintaining financial stability is to ensure that financial institutions, financial markets and financial infrastructure continue to play key functions, continuously improve the ability of the financial system to resist risks and serve the real economy, prevent individual local risks from evolving into systemic and overall risks, and maintain the bottom line of no systemic financial risks.
In addition, the draft financial stability law clearly proposes the establishment of a financial stability guarantee fund. The financial stability guarantee fund was first proposed in the government work report in 2022, and then repeatedly mentioned by the management. On March 25, 2022, the State Council issued the opinions on the implementation of the division of key work of the government work report, which clearly proposed to "complete the work related to the raising of financial stability guarantee fund by the end of September". As a resource reserve for resolving risks, the financial stability guarantee fund is established to deal with major risks of systemic hidden dangers and keep the bottom line of no systemic risks. From the perspective of the current financial market, the uncertain factors of the situation at home and abroad have increased significantly, and the risks faced by the economic and financial field are still large. The geopolitical conflict between Russia and Ukraine and the game between China and the United States have exacerbated the impact on the financial market, and these impacts go beyond the capacity of conventional risk disposal means.
In recent years, China has implemented the deposit insurance system for deposit financial institutions, established industry guarantee funds in the insurance industry and trust industry, and established investor protection funds in the securities industry and futures industry. Although the functions of these funds are different, the same thing is that the funds are funded and established by industry institutions and operated by special management institutions. When the operation of industry institutions fails or encounters major difficulties, The industry security fund contributes to its reorganization, liquidation and appropriate compensation to the creditors of industry institutions. Compared with the above industry funds, the financial stability guarantee fund has wider coverage, stronger cross industry attributes and more obvious perspective of overall policy assistance.
On the whole, the financial stability law will further improve China's financial legal system, and the establishment of financial stability guarantee fund is also a new exploration in resolving major risks. Although, at present, China's financial risks have tended to converge, the macro leverage ratio has decreased slightly, and the number of high-risk financial institutions has decreased. However, it should also be noted that under the background of increasing downward pressure on the economy, some enterprises have increased the number of default events, which requires that the prevention and resolution of financial risks need to be adjusted accordingly, and the risk disposal of relevant industries and enterprises should be done well. In the medium and long term, the introduction of the financial stability law will strengthen the top-level design and overall coordination of the financial stability legal system, help improve the financial stability supervision system covering the whole market, and effectively improve the ability of systemic financial risk prevention and control. The financial stability guarantee fund, together with the existing industry guarantee fund, will also become an important tool of China's financial safety net and the firewall of the financial stability guarantee system with Chinese characteristics, which is of great significance to maintain the stable operation of macro-economy and finance and stabilize market expectations.
Risk tips
The global epidemic has worsened, the economic trend has fallen short of expectations, and China US trade relations have deteriorated.
