What does the Great Reform of Financial Supervision Mean for Financial Institutions
2023-03-21
The recently concluded two sessions of the NPC and CPPCC passed a new round of institutional reform plans of the State Council, among which the most noticeable measures are undoubtedly related to the reform of the financial regulatory system. Among the 13 reforms, 6 involve financial regulatory reform, including the establishment of the National Financial Supervision and Administration Administration (hereinafter referred to as the "FSMA"), strengthening the unified leadership of the central government over finance, and strengthening the protection of financial consumers. These reforms aim to improve the efficiency of the financial system and strengthen the ability to prevent and resolve systemic financial risks. The above measures have opened the beginning of China's financial regulatory reform. On March 16th, the "Party and State Institutional Reform Plan" was issued, proposing the establishment of the Central Financial Committee, and clarifying its guiding ideology of "top-level design, overall coordination, overall promotion, and supervision of implementation of financial stability and development", further reflecting the need to build a financial regulatory system that conforms to the essential characteristics of a socialist market economy. Looking globally, there are several mainstream international financial regulatory models: a separate regulatory model, represented by the "China Banking and Insurance Regulatory Commission+China Securities Regulatory Commission" before this reform, with the representative countries including the United States, France, Italy, and so on; A unified regulatory model, represented by the Singapore Financial Supervisory Authority; The bimodal model is represented by the UK Financial Conduct Authority and the Prudential Regulation Authority. After the reform of China's financial regulatory system this time, the new structure of "one bureau, one meeting" will reflect unique Chinese characteristics: behavioral regulation with the protection of investors and consumers as the core and the maintenance of market order as the purpose will be uniformly under the jurisdiction of the General Administration of Financial Supervision, while micro prudential regulation with the stable operation of financial institutions as the core and the prevention of market risks as the purpose will retain a separate business model, The General Administration of Financial Supervision and the Securities Regulatory Commission are responsible for prudential supervision of the non securities industry and the securities industry, respectively. From the historical experience of promoting the transformation of financial regulatory systems in multiple countries such as the United Kingdom, Germany, South Korea, and the United Arab Emirates, it can be seen that the regulatory model will continuously optimize dynamically with market development. Therefore, in the reform process, it is more important to implement efficiency and process management, reduce the impact and shocks caused by system reform, and promote the steady transition of the financial industry to high-quality development. From the perspective of reform, we believe that financial institutions should consider the development direction and key measures for the next three to five years based on the following major issues, in order to comply with the modernization process of China's financial industry, fully support the reform of the financial regulatory system, and achieve high-quality development of their own. First, establish a comprehensive risk management mechanism for the Group. Under the unified jurisdiction of the General Administration of Financial Management, financial groups such as financial holding companies, especially those involved in internet finance, may face more systematic supervision. These institutions should attach importance to establishing and improving their own comprehensive risk management mechanism and risk transmission prevention mechanism. Based on a clear governance structure, clear risk appetite, independent risk defense lines, and solid data systems, systematically review the concentration risk, cross risk, and potential risk contagion effects of traditional financial institutions, large investment sectors, and non-financial sectors, and develop corresponding risk plans and response mechanisms. In particular, attention should be paid to the transmission of non-financial risks such as operational risks to financial risks, the isolation and prevention of risks in the context of mixed industry and finance, and the emerging risks that are difficult to quantify, such as data and information security, brought about by Internet businesses. Second, strong
Edit：Hou Wenzhe Responsible editor：WeiZe
Source：YiCai Net
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