Caixin
Aug 23, 2018 04:15 AM
FINANCE

Top Financial Regulator Unveils Organizational Plan

The China Banking and Insurance Regulatory Commission was established in April. Photo: Caixin
The China Banking and Insurance Regulatory Commission was established in April. Photo: Caixin

* Restructuring plan outlines steps to consolidate several departments of the previous banking and insurance regulatory bodies that will trim over 100 jobs

* New units will be created to grant the regulator sharper teeth in managing industry risks and punishing market violators

China’s top banking and insurance regulator Wednesday unveiled a long-awaited plan to reorganize its departments and personnel, painting in the last details of a major overhaul in the country’s financial regulatory landscape.

The plan, in a document dated Aug. 14, clearly defines the leadership, institutional structure and organizational responsibilities of the China Banking and Insurance Regulatory Commission (CBIRC). The agency was created in April in a sweeping government revamp that merged the previously separate banking and insurance regulatory bodies.

The creation of the CBIRC is the biggest reshuffle in China’s financial regulatory system since the former China Banking Regulatory Commission (CBRC) was spun off from the central bank in 2003. It is a major effort to fix flaws in China’s fragmented regulatory system, built around the central bank and three regulatory commissions overseeing banking, insurance and securities. The old regulatory structure faced increasing problems dealing with financial institutions exploiting gaps and loopholes to carry out risky and sometimes shady business practices.

The CBIRC restructuring plan outlines steps to consolidate several departments of the previous CBRC and China Insurance Regulatory Commission (CIRC) that will trim more than 100 jobs.

The CBIRC will also set up new departments to enhance the regulator’s capacity to inspect and investigate market misconduct, reversing a 2015 restructuring plan initiated by Yang Jiacai, a former assistant chairman of the CBRC who was sentenced to 16 years in prison last month for accepting tens of millions of yuan in bribes.

Consolidate and empower

Caixin learned that the CBIRC set up a five-member team led by Chairman Guo Shuqing to decide major personnel changes as the restructuring unfolds. Guo will have four deputies, meaning that some of the current seven deputy chairmen will face retirement or reappointment, Caixin learned.

The CBIRC will also install four chief officers, overseeing risk control, inspection, legal affairs and accounting, according to the plan.

Caixin learned that candidates for the new chief officer posts include Xiao Yuanqi, former director of the CBRC’s prudential regulation bureau; Yang Liping, former director of the CBRC’s large-scale bank department; Liu Fushou, former legal affairs head of the CBRC; and Ma Xueping, former chief accountant of the CIRC.

The CBIRC will carry out its duties through 26 functional departments and the party committee office, integrating 37 former departments of the CBRC and the CIRC. The consolidation will reduce the number of employees of the new commission by 12% to 925 from current 1,050. The job cuts will be carried out over three years, Caixin learned.

The consolidation plan applies only to the CBIRC headquarters. Further restructuring involving local branches will be released later, sources told Caixin. At the local level, the CBRC has 36 branches, 306 sub-branches and 1,730 offices across the country, and the CIRC has 36 branches and 13 sub-branches.

The organizational shakeup reflects efforts to enhance the CBIRC’s capacity to monitor market risks and crack down on illicit practices. Among the 26 functional departments, four units were created or revamped to scrutinize financial institutions’ corporate governance, carry out on-site inspections of bank and other financial institutions and deal with major violations.

The new departments are expected to give the regulatory agency sharper teeth in managing industry risks and punishing market violators.

China has spent more than two years cracking down on financial risks and misconduct that thrived amid lax regulation. A number of cases shed light on how executives and shareholders manipulated financial institutions in freewheeling deals.

In January, the Chengdu branch of Shanghai Pudong Development Bank was slapped with a 462 million yuan fine after it was found to have worked with seven real estate and mining companies to set up nearly 1,500 shell companies to transfer risky debts to cover bad loans.

In other cases, private conglomerates were found using opaque ownership to get control on financial institutions to fund their risky investments. One of the notorious examples is Anbang Insurance Group Co. Ltd., which was known to have stakes in 14 domestic financial institutions, including six that it controlled.

Anbang, previously controlled by high-flying tycoon Wu Xiaohui, was taken over by the state in February after Wu was placed under investigation for fundraising fraud and embezzlement.

Under the plan, the CBIRC will also upgrade an office designated to crack down on illegal financing activities into a unit tasked to regulate illegal fundraising through non-bank platforms, reflecting regulators’ concerns over loosely regulated online financial practices such as the scandal-ridden peer-to-peer lending and virtual currency transactions.

Contact reporter Han Wei (weihan@caixin.com)


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