By Zhang Chenghui & Chen Daofu, Member of the Research Team on “The Restructuring of China’s Financial Regulatory Framework”, Research Institute of Finance, DRC

Research report No.55, 2016 (Total 4938) 2016-5-9

Abstract: For China’s financial regulation and management reform, some financial regulatory reform measures must be improved relating to financial development approach, risk awareness and government management model. Recent reform measures should stick to problem-oriented issues and focus on function re-establishment and regulatory coordination. For example, we should make clear the obligations of the financial regulatory coordination office and enhance financial regulatory coordination and reconfiguration of regulatory approach during the transitional period. We should focus on making clear the boundaries between monetary policy, macro-prudential regulation and micro-prudential regulation. As with those systematically important financial institutions (groups) and financial infrastructures, those with huge risk exposure and in need of liquidity bailout or solvency bailout from the deposit insurance institutions should be jointly supervised. But the implementation of relevant measures is mainly the duty of the regulatory department. We should build a regulatory information-sharing mechanism and divide central and local financial regulatory functions. As for mid-term reform, we could turn the emphasis onto the reconfiguration of organizational institutions, such as forming a comprehensive financial regulatory committee, setting up a micro-prudential management bureau and market performance management bureau, and integrating the protection institutions in different regulatory departments for investors and consumers of small and medium-sized businesses into an independent protection bureau for investors and consumers of small and medium-sized businesses.

Key words: financial regulation, regulatory approach, regulation reform