Five Things to Know About China’s Overarching Financial Stability Law
China’s central bank on April 6 unveiled a draft financial stability law that seeks to unify the country’s scattered rules on dealing with risks and build on the lessons learned from the last few years’ repeated financial train wrecks.
The legislation is Beijing’s latest attempt to build a long-term market-oriented mechanism to resolve risks at financial institutions, rather than dealing with incidents on a case-by-case basis. While the more ad-hoc approach has so far seemingly succeeded in containing systematic risks, its shortcomings have become evident. These include a lack of a coordination and accountability, as well as difficulty in controlling the costs and length of the risk resolution process.
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