Bank of China Calls for Tougher Financial Safeguards

Officials from The People’s Bank of China are reportedly calling for stricter financial regulations.

Writing in China Finance, a publication of the central bank, a trio of officials said China should speed up passage of its Financial Stability Law and improve other regulations to prevent financial risks in light of the Silicon Valley Bank crisis.

The People’s Bank of China (PBOC) report — cited by Reuters on Sunday (April 2) — also argued that China should use its deposit insurance system to swiftly deal with problematic lenders to stave off systemic risks.

The authors said commercial banks in China are on the whole healthy, but argued the government should consolidate capital reserves to make sure there are enough resources to deal with risks in a timely manner.

The news comes days after reports that a pair of Chinese officials had proposed stronger regulation for cryptocurrency.

Xuan Changneng, a deputy governor at the PBOC, said Friday (March 31) that although regulators should make room for innovation, they should also respect existing rules and test new technologies.

In a speech at the Boao Forum, Changneng cited examples of risks and fraud associated with crypto, including the failures of Signature Bank and the self-liquidation of Silvergate Bank, two U.S. banks that had provided financial services for crypto companies

“The regulation philosophy, technology and capability must be upgraded to ensure financial innovation won’t come at the cost of financial stability,” Changneng said, per a report by Bloomberg News.

Also at the Boao Forum, Liao Min, a vice finance minister of China, argued that China needs to get “deeply” involved in international cooperation and coordination of standards.

China’s efforts to ramp up oversight into their financial system came as officials in the U.S. called for tougher regulations for America’s banking system.

For example, the Biden administration is apparently looking at a number of measures, including restoring parts of the Dodd-Frank law that were abolished during President Trump’s tenure.

Last week also saw lawmakers propose The Failed Bank Executives Clawback Act of 2023 that would require federal regulators to take back compensation from executives at failed banks.

During hearings March 27, Federal Reserve Vice Chair for Supervision Michael Barr and Federal Deposit Insurance Corp. (FDIC) Chairman Martin Gruenberg mentioned the possibility of other future banking regulations.

Some proposals mentioned by the officials during the Senate committee hearing included exploring liquidity rules for banks, creating tougher stress tests for banks and exploring changes to the current deposit insurance rules.