The five detailed assessment reports (DARs) just released by the International Monetary Fund (the IMF) and the World Bank (the Bank) pointed out that, China's financial system showed a high degree of adherence to international standards and codes in the financial sector, including the Core Principles for Effective Banking Supervision, the Objectives and Principles of Securities Regulation, the Insurance Core Principles and Methodology, the Core Principles for Systemically Important Payment Systems and the Recommendations for Securities Settlement Systems. The reports were part of the results of China Financial Sector Assessment Program (the FSAP), which carried out an assessment of China's financial regulatory and supervisory framework.
In the reports, the IMF and the Bank fully recognized the remarkable progress China has made in its financial system over recent years. Considerable progress has been made in supervisory capacity, legal system, transparency, and consumer protection, and the supervisory effectiveness has improved substantially. With the basic completion of share-holding reforms of major financial institutions, the financial strength of China's financial system as a whole has been improved dramatically, the corporate governance and risk management capacity enhanced steadily, and overall robustness of the financial system strengthened immensely. Financial infrastructure, including the payment and securities settlement systems, has been strengthened impressively, which provides fast, efficient, secure and reliable services to the financial markets.
China has been unswervingly pushing forward the reforms of the financial sector, and promoting the development and stability of its financial industry through reforms. Since 2003, China has promoted and completed a series of landmark financial reforms, such as the share-holding reforms of major financial institutions, including financial restructuring, strategic investor participation, and initial public offerings. With the deepening of reforms, the financial indicators of major financial institutions continued to improve, corporate governance has been strengthened, and risk management capacity improved significantly. In the meantime, China's financial industry and financial markets have upgraded their adherence to international standards and codes. Against the backdrop of the “emerging” and “transitional” nature of the Chinese economy, China's financial system has reached another level, which helped China withstand the impacts of the global financial crisis.
By strictly adhering to international standards and codes, the supervisory effectiveness improved considerably. In the banking sector, a high quality prudential supervisory legal system was put in place, the supervisory capacity was enhanced on a continuous basis, and the corporate governance and risk management capacity of banking institutions were improved substantially. In the capital market, efforts were made to launch the reform of non-tradable shares and the trading of stock index futures, introduce the third party custodian system for client settlement fund and the risk-based net capital requirement for securities firms. Market transparency was improved, and the financial robustness of intermediaries was enhanced. In the insurance industry, remarkable achievements have been made in the establishment of a relatively comprehensive supervisory framework, as well as in supervisory enforcement, risk-based differentiated supervision, regulatory cooperation and information sharing with other relevant agencies, and consumer protection.
In the meantime, the financial infrastructure has been upgraded steadily. China has set up its National Advanced Payment System, which provides fast, efficient, secure and reliable clearing and settlement services to banking, private and public entities and financial markets. Over the past two decades, the securities settlement system has played an important role in the development of securities and futures markets. In short, China's payment and securities settlement systems showed a high degree of adherence to international standards and codes.
Due to limitations in the analytical framework and professional resources, the reports did not give full consideration to the realities in accordance to China's current economic development stage. However, we believe that many suggestions in the reports are of great relevance to improving China's financial system. We are willing to deepen collaboration and exchanges with international financial organizations, value the useful recommendations in the reports and identify gaps that might exist in the financial system. We'll continue to promote in-depth reforms in China's financial sector, strengthen the financial stability and crisis management framework, increase the supervisory effectiveness of the financial industry, and further improve the financial infrastructure and financial services, so as to support the stable and sound development of the economy.
Source:pbc.gov