Caixin
Mar 09, 2021 07:50 PM

Reg Watch No. 3: What You Need to Know About China’s Banking and Insurance Supervisor

Reg Watch aims to put regulations in context. It provides thorough analysis of regulatory changes and a history of their development, accompanied by explainers on key regulatory bodies as well as insights into what China’s regulators are thinking.

After its accession to the World Trade Organization (WTO), China formally set up a three-branch financial regulatory model in 2003, with the bodies in charge of securities, banking and insurance, respectively. In doing so, the government aimed to spin off regulatory responsibilities from the central bank.

But in the process, the regulatory regime became highly fragmented, and worries about systemic risks rose. Meanwhile, corruption and regulatory capture emerged. An insurance czar was prosecuted in April 2017, leaving the insurance regulatory body without a head for months.

Efforts to consolidate financial regulation started in July 2017, beginning with the establishment of the Financial Stability and Development Committee, to lead and coordinate efforts among the central bank and other financial regulators. That was followed by a wave of new regulations to rein in shadow banking, wealth management and internet finance, and to mandate the establishment of financial holding companies. The last measure was introduced in 2020 around the time that the stymied Ant Group IPO rocked the market.

Then in March 2018, amid a government department reshuffle, the insurance and banking regulators became one consolidated body — the China Banking and Insurance Regulatory Commission (CBIRC). The move aimed at reducing regulatory arbitrage made possible by overlaps and vacuums under fragmented supervision.

The CBIRC carries out licensing, monitoring and enforcement work for China’s sizable banking and insurance sectors. By the end of 2020, the total assets of China’s banks and insurers amounted to $48.9 trillion and $3.6 trillion, respectively. Inspections are conducted with consumer rights protection and risk evaluation in mind. The CBIRC also supervises corporate governance reform. Additionally, it sets out rules for nonbank financial institutions including consumer finance, microloan companies, pawnbrokers and local asset management companies.

The CBIRC works closely with the central bank, which formulates the macroprudential framework under the guidance of the Financial Stability and Development Committee. The close ties between the two agencies are evident in the fact that CBIRC Chairman Guo Shuqing (郭树清) is concurrently the central bank’s Communist Party chief and vice governor.

Reducing Risks

In recent years, CBIRC has been busy with derisking:

Reducing shadow banking

• Dealing with failing banks and insurers (e.g. Baoshang Bank bankruptcy, Anbang Group takeover)

Slowing property-related lending

Eliminating P2P lending

• The disposal of non-performing assets

Following is a brief intro about key people and departments under CBIRC:

REG WATCH CHARTS-1

The senior CBIRC management team consists of one chairman, four vice chairman and a chief inspector. Also, a chief legal counsel and a chief accountant are appointed.

Guo Shuqing (郭树清), CBIRC chairman

Pro-market reformer Guo is a key person in deleveraging and reversing deregulation in the financial sector. Since 2017, when Guo became chairman of the then banking regulator, the sector saw significantly more penalties and fines. Now concurrently serving at CBIRC and the central bank, his dual posts give him a role in macro policymaking, and the power to keep the micro level in line. Previously, Guo served as chairman of China Construction Bank, chairman of China Securities Regulatory Commission and governor of Shandong province.

Cao Yu (曹宇), CBIRC vice chairman

Cao serves as vice chairman of CBIRC since the grand merger in 2018. Prior to the current assignment, he was vice chairman of CBRC. Before joining the banking regulatory system, Cao had worked at the General Office of the State Council since 1985 and served in various roles in different departments there.

Zhou Liang (周亮), CBIRC vice chairman

Zhou is a vice chairman with a background in both discipline inspection and financial regulation. Zhou joined CBRC in 2017 and then became CBIRC vice chairman after the merger in 2018. Prior to that, Zhou assumed positions in the Communist Party’s Central Commission for Discipline Inspection (CCDI). Before joining the CCDI, Zhou worked at the State Council as well as the governments of Guangdong, Hainan and Beijing.

Liang Tao (梁涛), CBIRC vice chairman

Liang was appointed vice chairman of CBIRC in 2018. Prior to the current assignment, he served as vice chairman of the now-defunct China Insurance Regulatory Commission (CIRC) since 2015. Liang has two decades of experience in insurance supervision and served various roles in the CIRC. Before joining the CIRC, he worked at the State Price Control Bureau, National Economic Reform Commission, National Planning Commission and General Office of the State Council.

Li Xinran (李欣然), CBIRC chief inspector

Li was appointed chief inspector of the Discipline Inspection and Supervision Office of the CCDI at the CBIRC in 2018. Prior to his appointment at the CBIRC, he had two decades of experience in the CCDI.

Xiao Yuanqi (肖远企), CBIRC vice chairman

The former chief risk officer and spokesperson was promoted to vice chairman in 2021. As the CBIRC’s chief risk officer, Xiao has talked a lot about defusing and preventing financial risks. Previously, he had worked in a variety of positions at the central bank and at the banking regulator before the grand merger. As a banking regulator, he had extensive supervision experience at different types of banks domestically and abroad.

REG WATCH CHARTS-2

CBIRC has 26 functional departments, 36 provincial offices and 306 local branches.

Among the 26 departments, 10 were combined from both the China Banking Regulatory Commission (CBRC) and the CIRC, while 10 CBRC departments and four CIRC departments were retained respectively, and two new departments were established for derisking and corporate governance purposes.

Updated: March 8, 2021

Jasper Liu is an analyst at Caixin Insight, the research arm of Caixin Group.

Contact analyst Jasper Liu (jasperliu@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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