For the first time, the responsibilities of the National Financial Stability and Development Coordination Mechanism (the State Council Financial Commission) have been clarified and proposed to establish a disposal fund pool and establish a financial stability guaranteefund
peopleBankThe Financial Stability Law of the People’s Republic of China (Draft for Comments) was drafted in conjunction with relevant departments (hereinafter referred to as the “Draft for Comments”), and public comments were solicited from the public on April 6.
The draft for comments clarifies the working mechanism of financial stability and the operation of the Financial Stability Guarantee Fund. The draft for comments insists on strengthening the management and control of the source of financial risks and fully incorporating financial activities into supervision.
Analysts believe that the draft for comments is in line with the reality of my country’s financial development, hits the key points of financial risk prevention and resolution, effectively consolidates the legal foundation of my country’s financial stability, helps to improve the financial stability supervision system covering the whole market, and improve the unified and coordinated financial risk. The prevention and control mechanism is in place to effectively maintain financial security and stability.
Why the Financial Stability Act was introduced
On the need for a financial stability law, the peopleBankIn the drafting note, it is stated that this is in line with the urgent need to improve my country’s financial rule of law system. At present, in terms of financial stability, there is a lack of overall design and cross-industry and cross-departmental overall arrangements. The relevant provisions are scattered in many financial laws and regulations, and the provisions are too principled, and some important issues still lack institutional norms. Therefore, it is necessary to formulate a special financial stability law to strengthen the top-level design and overall coordination of the financial stability legal system.
This also provides a solid institutional guarantee for preventing and defusing major financial risks. “Faced with the complex domestic and international economic and financial situation, it is necessary to take the lead in the system, take precautions, establish an authoritative and efficient financial risk prevention, resolution and resolution mechanism, and firmly hold the bottom line of no systemic financial risk.” The drafting statement stated.
“Looking at home and abroad, financial development and financial supervision must be based on financial stability.”Minsheng BankChief researcher Wen Bin said that in recent years, my country has achieved important phased results in the battle to prevent and resolve financial risks, and the overall financial risks have tended to converge. System fragility still exists, and the existing financial risk resolution mechanism is still inadequate.
Wen Bin said that the Financial Stability Law is the legal cornerstone of maintaining financial security and has a fundamental position in the legal mechanism for maintaining financial security. The release of the draft for comments will provide a basic legal guarantee for my country’s financial security and stability, and is conducive to further improving and strengthening the top-level design of my country’s financial stability system.
Improve the working mechanism of financial stability and consolidate the responsibilities of all parties
The draft consultation draft establishes a clear institutional framework for financial stability work.
Among them, the National Financial Stability and Development Coordination Mechanism (Financial Committee of the State Council) coordinates financial stability and reform and development, directs the prevention, resolution and disposal of major financial risks, and major matters are submitted for approval according to procedures.
Relevant departments and localities shall, in accordance with the division of responsibilities and the requirements of the Finance Committee, perform their duties of preventing, resolving, and disposing of financial risks in accordance with the law, and closely coordinate and cooperate to form a joint effort.depositinsuranceFund management institutions and industry-guaranteed fund management institutions shall perform their duties in accordance with the law, and play the role of market-oriented and law-based disposal platforms.
Regarding the principle of maintaining financial stability, the draft consultation draft states that it is necessary to insist on strengthening the management and control of the source of financial risks, fully incorporate financial activities into supervision, handle financial risks in accordance with the principles of marketization and the rule of law, fairly protect the legitimate rights and interests of market players, and prevent moral hazard.
How the Financial Stability Assurance Fund works
The Financial Stability Law clearly establishes the Financial Stability Guarantee Fund as a reserve fund for the country’s disposal of major financial risks.
How will it work? According to the drafting instructions, drawing on international common practice, the fund is composed of funds raised from financial institutions, financial infrastructure and other entities, as well as other funds specified by the State Council.
When necessary, the peopleBankPublic funds such as re-lending can provide liquidity support for the fund, and the fund shall repay the re-lending with proceeds from disposal, proceeds and industry charges.
At the same time, it is clear that the State Council stipulates the specific methods for the raising, management and use of the financial stability guarantee fund, leaving institutional space for further exerting the role of the financial stability guarantee fund in the future.
Financial Stability Assurance Fund and Existing DepositsinsuranceFunds and industry security funds operate at two levels and cooperate with each other to further strengthen my country’s financial safety net.
The risk disposal mechanism highlights marketization and legalization
The establishment of a market-oriented and legalized risk disposal mechanism is also a key content of the draft for comments.
According to the actual needs of disposal and with reference to international practices, the Financial Stability Law adds new disposal instruments such as the overall transfer of assets and liabilities, the establishment of bridge banks and special-purpose vehicles, and the suspension and termination of net settlement.
In accordance with the principle of marketization and the rule of law, it is clear that the disposal institution can implement equity, debt write-down and debt write-down according to law.Convert stockallocating disposal costs.
Clarify the write-down order of equity and debt to ensureshareholder, the legitimate rights and interests of creditors and relevant stakeholders, and clarify that the income of creditors and relevant stakeholders through risk disposal shall not be lower than the income from bankruptcy liquidation. Improve the arrangement of supporting systems for disposal, and maintain connection with judicial procedures.
(Article source: Shanghaisecuritiesnewspaper)