Zhongxin Finance, April 6 (Reporter Li Jinlei) On April 6, the People's Bank of China publicly solicited opinions on the "Financial Stability Law of the People's Republic of China (Draft for Comment)".
Why the Financial Stability Act?
The draft Financial Stability Law has 48 articles in six chapters, which are divided into general provisions, financial risk prevention, financial risk mitigation, financial risk disposal, legal liability, and supplementary provisions.
Why is such a law needed?
The drafting instructions explain the necessity of enacting the law, which is an urgent need to improve my country's financial rule of law system, provide a solid institutional guarantee for preventing and defusing major financial risks, summarize experience in the battle against major risks in a timely manner, and improve the ability to prevent and control systemic financial risks.
Preventing and defusing financial risks is the eternal theme of financial work.
The suddenness, spillover, complexity and strong correlation of financial risks, once the contagion spreads, will have a destructive impact on the national economy and social development.
Faced with the complicated domestic and international economic and financial situation, it is necessary to set up an authoritative and efficient mechanism for preventing, resolving and disposing of financial risks, and firmly maintain the bottom line that systemic financial risks will not occur.
Wen Bin, chief researcher of Minsheng Bank, told China-Singapore Finance reporter that the "Financial Stability Law" is the legal cornerstone for maintaining financial security and will provide a basic legal guarantee for my country's financial security and stability, and is conducive to further improving and strengthening the top level of my country's financial stability system. Design and improve a unified and coordinated financial risk prevention and disposal mechanism, effectively promote the legalization and normalization of my country's financial risk prevention and resolution work in the new era, and effectively maintain financial security and stability.
Data map: People's Bank of China.
Photo by China News Agency reporter Zhang Xinglong
How to divide the responsibilities of financial risk disposal?
Preliminary disposal practice shows that some small and medium-sized financial institutions have failed corporate governance, extensive business models, and some shareholders and actual controllers abuse their control rights and illegally occupy financial institutions’ funds. These are the important reasons for the occurrence of financial risks. The supervisory responsibilities of financial supervisory authorities also need to be further implemented and strengthened.
The Financial Stability Law consolidates the main responsibilities of financial institutions and their major shareholders and actual controllers, strengthens financial institutions' prudential operation obligations, and strengthens access and regulatory requirements for major shareholders and actual controllers.
According to the draft for comments,
the disposed financial institution and its major shareholders and actual controllers shall bear the main responsibility for risk disposal, the disposed financial institution shall use all means to save itself, effectively recover and restore the losses, and the shareholders of the disposed financial institution shall absorb the losses in accordance with the law.
In addition, the "Financial Stability Law" also condenses the territorial and stability maintenance responsibilities of local governments, and proactively resolves regional financial risks in a timely manner.
Consolidate the regulatory responsibilities of the financial regulatory authorities, earnestly perform the financial risk prevention and control responsibilities in the industry, and strictly prevent, correct and deal with risks in a timely manner.
The People's Bank of China plays the role of the lender of last resort and maintains the bottom line of preventing systemic financial risks.
Where does the money to deal with financial risks come from?
Dealing with financial risks requires investment of financial resources.
Since 2008, international organizations and major economies have emphasized that to deal with risks, financial institutions must first self-bail out and then take external assistance to reduce dependence on public funds.
The "Financial Stability Law" adheres to the above principles.
First, the disposed institutions are required to actively rescue themselves and mitigate risks. The major shareholders and actual controllers replenish capital in accordance with the recovery and disposal plan or regulatory commitments, and shareholders and actual controllers who are responsible for financial risks shall perform their duties in accordance with the law. duty of self-help.
At the same time, mobilize market-oriented funds to participate in the merger, acquisition and reorganization of disposed institutions, and give play to the role of deposit insurance funds and industry security funds as a market-oriented and law-based disposal platform.
If regional stability is endangered, and it is still difficult to resolve the risk after exhausting market-oriented means and strictly implementing the recovery of assets and losses, the local public resources shall be used in accordance with the law; if major financial risks endanger financial stability, the financial stability guarantee fund shall be used in accordance with regulations to effectively prevent moral hazard, seriously market discipline.
How does the Financial Stability Assurance Fund work?
The "Financial Stability Law" clearly establishes a financial stability guarantee fund as the state's reserve fund for the disposal of major financial risks.
The Financial Stability Guarantee Fund, first proposed in the 2022 Government Work Report, has finally appeared.
Where does the money come from?
The Financial Stability Guarantee Fund consists of funds raised from financial institutions, financial infrastructure and other entities, as well as other funds specified by the State Council.
When necessary, public funds such as PBOC re-lending can be used to provide liquidity support for the financial stability assurance fund, which should be repaid with disposal proceeds, proceeds, and industry charges.
The specific measures for the raising, management and use of the financial stability guarantee fund shall be formulated by the State Council.
The Financial Stability Guarantee Fund and the existing deposit insurance fund and industry guarantee fund operate in two layers and cooperate with each other to further strengthen my country's financial safety net.
Dong Ximiao, chief researcher of China Merchants Union Finance, told China-Singapore Finance and Economics reporter that the financial stability guarantee fund will have a wider coverage, which will help broaden the sources of funds for preventing and defusing financial risks, and establish a more market-oriented approach to maintaining financial stability and financial stability in addition to the deposit insurance system. Financial Risk Disposal Mechanism.
The "Financial Stability Law" includes the Financial Stability Guarantee Fund, which will make the Financial Stability Guarantee Fund have legal effect, and there will be laws to abide by in the raising, management and use of funds.
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