On Thursday, China introduced the National Administration of Financial Regulation (NAFR), its new financial regulatory body.
Experts hailed the establishment of NAFR as a significant stride for China in its pursuit of bolstering and enhancing financial oversight through institutional reforms.
The NAFR’s primary objective is to comprehensively fortify institutional regulation, behavioral supervision, functional regulation, penetrating supervision, and continuous regulation.
Li Yunze, the Party secretary of the administration, emphasized that the NAFR would provide robust support and protection for the establishment of China’s new development pattern and the promotion of high-quality development.
During the unveiling ceremony in Beijing, Li stressed that the NAFR must fully execute three major tasks: serving the real economy, preventing and controlling financial risks, and deepening financial reforms. The administration aims to bring all financial activities under legal regulation, eliminate regulatory gaps and blind spots, foster regulatory coordination between central and local governments, and steadfastly maintain the bottom line of avoiding systemic financial risks.
Vice-Premier He Lifeng, a member of the Political Bureau of the Communist Party of China Central Committee, attended the ceremony and revealed the administration’s nameplate.
According to Xinhua News Agency, the NAFR will operate directly under the State Council, China’s Cabinet, and is formed by transforming the former China Banking and Insurance Regulatory Commission. The establishment of this new regulatory body aims to enhance and refine the country’s financial regulation, addressing long-standing issues within the financial sector.
The NAFR assumes responsibility for regulating the financial industry, excluding the securities sector. It will take on certain functions previously held by the People’s Bank of China, the central bank, and the China Securities Regulatory Commission.
Zeng Gang, Director of the Shanghai Institution for Finance & Development, stated that the primary objective of the institutional reform in financial supervision is to achieve comprehensive regulation of diverse financial activities, improve the quality and effectiveness of financial regulation, effectively prevent and resolve financial risks, and steadfastly guard against systemic risks.
As part of the specific reform measures, the establishment of the NAFR enables better coordination between mixed-ownership operations and segmented regulation. It also facilitates behavioral regulation, entity supervision, functional regulation, and prudential regulation, Zeng added.
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According to Wang Jiaqiang, a senior researcher at the BOC Research Institute, the NAFR will assume expanded and reinforced functions and responsibilities. These include unified supervision of financial industries beyond securities and the overall protection of financial consumers’ rights and interests.
Wang emphasized that the reform measures will broaden the scope and effectiveness of financial regulation. They will address persistent issues such as regulatory gaps, overlaps, and arbitrage within the financial sector. Furthermore, the reforms will facilitate the promotion of standardized and unified financial products and services.
He stated that these reforms will aid China in strengthening financial risk management, prevention, and resolution. They will also facilitate crackdowns on violations of laws and regulations, and improve the quality and effectiveness of financial regulation.
Wang noted that financial regulation has entered a new phase of robust oversight. While the operational development of the banking industry will face stronger regulatory constraints, it can also expect a more stable financial environment.