China.org.cn | September 12, 2024
Haibao News:
How can the five major regulatory requirements be specifically implemented to enhance the full-process and full-chain monitoring and early warning systems for financial institutions and activities? Thank you.
Xiao Yuanqi:
I would like to invite Mr. Wang to answer this question.
Wang Shengbang:
Thank you for your interest. Our primary responsibility at the NFRA is regulation. In line with the "five major regulatory requirements" clearly outlined at the Central Financial Work Conference, we are diligently implementing these requirements, emphasizing a strong and strict regulatory approach. We are leveraging the advantages of our four-tier vertical management system — headquarters, provincial offices, branch offices and sub-branch offices — working together at all levels to continuously strengthen financial risk monitoring and early warning, and enhance risk prevention capabilities. I would like to share several key aspects of our work.
First, we have emphasized the principle of "comprehensive coverage" to achieve full coverage in financial regulation. The Central Financial Work Conference proposed that financial regulatory activities must cover all areas. In accordance with the requirements of the CPC Central Committee and the State Council, financial regulation must cover not only legal but also illegal activities, and manage risks across the entire industry. We adhere to the principles of financial licensing and licensed operations, ensuring that we address both "violations in licensed operations" and "unlicensed activities." The NFRA has utilized new technologies and methods to strengthen information connectivity and improve the monitoring and early warning platform for illegal financial activities. This has improved our ability to identify illegal financial activities and entities, enabling dynamic monitoring, timely warnings, proactive intervention and early resolution.
Second, we have adhered to a risk-based approach and strengthened the prudential regulatory framework for financial institutions. Our regulation is grounded in a risk-based prudential framework, further clarifying the boundaries for the sound operations of financial institutions and guiding them toward prudent management. As you may know, last year the NFRA issued new versions of the "Commercial Bank Capital Management Measures" and the "Measures for the Risk Classification of Financial Assets of Commercial Banks." These two measures form the foundational framework for our prudential regulation. Their implementation will play a crucial role in enhancing the risk management capabilities of commercial banks, further guiding them toward prudent and regulated operations, and strengthening the banking sector's ability to withstand risks. You may have also noticed that two weeks ago, the NFRA officially released a draft of "Measures for the Risk Classification of Insurance Assets" on its website for public comment. This draft emphasizes the importance of identifying the underlying assets of insurance investments based on the principle of transparency and classifying them according to their actual risk, thereby systematically improving the risk management capabilities of insurance companies. Recently, we have also continued to revise the management measures for fixed asset loans, working capital loans and personal loans — part of what was previously known collectively as the "three measures and one guideline" — to further standardize the credit-granting processes of commercial banks and improve their efficiency in serving the real economy.
Third, we have implemented the "four early" requirements to enhance the forward-looking nature of risk warnings. The NFRA has done a lot of work to further improve the risk rating system for financial institutions. We have introduced regulatory rating measures for insurance companies, trust companies and corporate financial companies, which play a foundational role in risk regulation. We have also further developed the risk monitoring and early warning system, enriched the risk monitoring and early warning indicators, and established a regulatory big data platform. By using intelligent analysis tools, we have enhanced our ability to probe and identify risks, increasing the forward-looking nature of risk recognition and improving the precision of regulation. We are also drafting work procedures for early intervention in financial institutions to establish a system with strict constraints for early intervention. The aim is to achieve early identification, early warning, early exposure and early resolution of financial risks.
Fourth, we have increased regulatory intensity and improved regulatory effectiveness. We are implementing stringent regulatory requirements, enhancing oversight by the NFRA, and ensuring coordination among administrative licensing, off-site monitoring, on-site inspections, regulatory enforcement measures and administrative penalties. We are addressing market anomalies and focusing on "key issues" affecting financial stability, such as credit, investment and bills; "key individuals" who pose financial risks, including senior executives and shareholders; and "key behaviors" that disrupt market order, such as related-party transactions and circular capital injection. We are strengthening supervision and imposing strict penalties for illegal and irregular activities. Last Friday, you may have noticed that the NFRA published a draft of the "Regulations on Compliance Management of Financial Institutions" on its official website for public comment. This draft aims to comprehensively enhance compliance management requirements for financial institutions, clarify compliance management responsibilities, and foster a compliance culture that permeates all levels of financial institutions. Over time, compliance will become an intrinsic part of financial institutions, solidifying the micro-foundation of our financial stability. Thank you.