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China cenbank official proposes financial stability law in magazine article

China cenbank official proposes financial stability law in magazine article

· 03/16/2021 04:40
China cenbank official proposes financial stability law in magazine article

- China should push for legislation on financial stability to be rolled out as soon as conditions are ripe, a vice governor of the central bank wrote in a magazine published by the bank on Tuesday.

China's financial stability will face more complex and severe challenges from profound changes in international political and economic landscapes, the global COVID-19 pandemic and structural adjustments in the economy, Liu Guiping said in an article published by China Finance.

"The establishment of a unified, orderly, efficient and authoritative legal system for financial stability has become a matter of great urgency," wrote Liu, who is also a delegate of the National People's Congress (NPC), or parliament.

Existing laws on financial stability are too scattered and lack implementation, he added.

For instance, central bank law charges the People's Bank of China (PBOC) with the duty to safeguard financial stability, but does not offer specific rules and policy tools for it to use.

Liu said it was necessary for policymakers to borrow from the experience of the United States and Germany in preparing legislation such as the Dodd-Frank Act and the Financial Stability Act.

The legislation would provide for setting up a mechanism to monitor systemic financial risks that could accurately identify high-risk institutions, Liu said.

"We will stick with the principle of early discovery, early intervention and early rectification, which would nip the risks in the bud."

A recently concluded annual session of China's mostly rubberstamp parliament gave no indication such financial stability legislation could be on the agenda soon. But at least one NPC delegate also called for its adoption at the right time.

On Monday, another PBOC official warned that the pull-out of high-carbon industries, part of China's pledge to achieve "carbon neutrality" by 2060, could bring systemic financial risks. nL1N2LD033


(Reporting by Stella Qiu and Ryan Woo; Editing by Clarence Fernandez)

((yifan.qiu@thomsonreuters.com; 86-10-66271289;))