The People's Bank of China (PBC) issued new guidelines to evaluate the stability of institutions and lower systemic risks Tuesday, according to a media briefing.
PBC (File photo: VCG)
It also pledged to set up a special mechanism to ensure the timely and proper handling of major risks inside financial institutions.
The 2008 international financial crisis indicates that systemically important financial institutions are important in the financial system because of their large scale, complex structure and business, and strong correlation with other financial institutions.
Once such major risks occur, they will impact the financial system and the real economy.
There are significant adverse effects that may even trigger systemic risks.
After the crisis, relevant international organizations and major economies have established relevant institutional arrangements for the supervision of systemically important financial institutions.
Major economies such as the US, the European Union and the UK have also established corresponding institutional arrangements for the supervision of systemically important financial institutions.
From China’s standpoint, the country has seen rapid development in recent years. Some large-scale and highly-complex financial institutions are at the core of the financial system because of their high degree of relevance to other financial institutions. They are also important to the overall stability of China's financial system and the service of the real economy.
The new guidance is designed to clarify the policy orientation of important financial institutions and improve the macro prudential institutional framework.
Three major procedures are suggested: a scientific assessment, strengthened supervision and setting up a special mechanism.
The assessment is meant to reasonably identify financial institutions that have a systemic impact on the soundness of the financial system.
The special mechanism is to ensure that systemically important financial institutions can be safely, quickly and effectively disposed of when major risks occur, the briefing said.
The regulations cover the systemically important banking, securities, and insurance institutions, as well as other institutions of systemic importance and the Financial Stability and Development Committee under the State Council.
The PBC suspended open market operations on Monday, citing abundant liquidity in the financial system.