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PBC Solicits Public Opinions on the Law of the People’s Republic of China on Financial Stability (Exposure Draft)

2022-05-03 17:25  

To implement the decisions and arrangements made by the Central Committee of the Communist Party of China (CPC) and the State Council on forestalling and defusing financial risks and on improving the rule of law in the financial sector, and to establish a long-term mechanism that safeguards financial stability, the People’s Bank of China (PBC), after intensive research and evaluation in collaboration with relevant authorities, drafted the Law of the People’s Republic of China on Financial Stability (Exposure Draft), which is now available for public opinions.

The CPC Central Committee and the State Council attach great importance to the rule of law in the financial sector. In recent years, China has made steady progress in the legislation in the financial sector. Notably, a multi-tiered financial legal framework has taken shape. It is guided by basic laws such as the Law on the People’s Bank of China, the Law on Commercial Banks, the Securities Law, and the Insurance Law, centered on administrative regulations, ministerial rules and normative documents, and supplemented by local regulations. However, the legal system concerning financial stability lacks holistic design, cross-department and cross-sector coordination, systematic and detailed articles, as well as regulations for some important issues. Therefore, it is necessary to formulate the Law on Financial Stability to make institutional arrangements for forestalling, defusing, and resolving financial risks. With a different focus, it is a complement to the existing financial laws.

Forestalling and defusing financial risks is an eternal theme for the financial sector. In recent years, following the strong leadership of the CPC Central Committee and the State Council, the Financial Stability Development Committee (FSDC) under the State Council has coordinated and directed the work at the forefront, government departments and administrative regions have made concerted efforts in fighting the tough battle of forestalling and defusing major financial risks and secured significant achievements. With the effective resolution of long-accumulated risks, financial risks have been contained and remained under control on the whole, hence reinforcing the foundation of financial stability, and boosting the overall stable and sound development of the financial sector. At present, China is striding toward the second centenary goal. Based on the “the two overall situations,” it is necessary to plan ahead by enacting the Law on Financial Stability and summarizing experience and practices proved effective in the tough battle against major financial risks, so as to improve the long-term mechanism for financial stability and safeguard national economic and financial security and social stability.

The Law on Financial Stability (Exposure Draft) has 48 articles in six chapters, which are General Provisions, Financial Risk Prevention, Financial Risk Defusing, Financial Risk Resolution, Legal Liabilities, and Supplementary Provisions. The draft law aims to establish a sound, efficient and authoritative mechanism that coordinates efforts to ensure financial stability. In specific, it will further ensure that financial institutions, their major shareholders and actual controllers assume primary responsibilities, local governments fulfill responsibilities within their jurisdictions, and financial regulators undertake regulatory responsibilities. It will strengthen financial risk prevention and early correction so that risks are identified and managed at an early stage. It will establish a market- and law-based risk resolution mechanism, and specify the sources and use of risk resolution funds, improve risk resolution measures and tools to protect the legitimate rights and interests of market entities. Also it will hold those who commit illegal and irregular conducts accountable, thereby consolidating the financial safety net and holding the bottom line that no systemic financial risk should occur.

In the next step, following the guidance of Xi Jinping Thought on the Rule of Law, the PBC will work with relevant authorities to push forward legislation in a scientific, democratic, and lawful manner. It will fully incorporate public feedback into the revision of the draft law, and cooperate with the legislature on subsequent work in accordance with legislative procedures, so as to release the Law on Financial Stability in due course.