Page 370 - 2019 White Paper on the Business Environment in China
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9 White Paper on the Business Environment in China
Corp Ltd in May 2018. The move follows in the footsteps policy, and direct more capital into key economic
of five other listed commercial banks, such as China areas and weak links, such as rural vitalization and
Construction Bank Corp, China Merchants Bank Co poverty relief. More efforts would made to improve
Ltd and Industrial Bank Co Ltd. Apart from exploring a disposal of bond defaults, and unify rules on approval
market-driven mechanism for the commercialization of and information disclosure of corporate credit bond
scientific research achievements, the tech subsidiaries of issuance. The central bank also listed financial services
these banks also aim to export fintech solutions to smaller in home rentals, establishment and improvement of
banks and other financial institutions. Minsheng Fintech a long-term mechanism on supervision over online
will mainly serve its parent bank and its subsidiaries finance and on risk prevention, and opening up of the
and partners. In addition, it will provide solutions bond market as important tasks in 2018 (Xinhua, Central
and products to small and medium-sized financial Bank to Improve).
institutions, private enterprises and microenterprises to
facilitate their fintech transformation. Niu Xinzhuang, The PBOC also encourage financial institutions
executive director of Minsheng Fintech, said the belonging to the banking sector to issue creative and new
tech subsidiary will establish an effective corporate types of bonds to supplement capital ahead of the tighter
operating mechanism and form a whole new incubation international regulatory standards that would come into
system for tech innovation. It also plans to build flexible effect from Jan 1, 2019. An announcement published
and efficient mechanisms for hiring, training and on the PBOC website said that “financial institutions
incentivizing talented professionals. These efforts are a belonging to the banking sector can explore and issue
bid to forge fintech into a core competency of the bank, bonds to enhance their total loss-absorbing capacity
he said. Ever since Fuzhou-headquartered Industrial (TLAC).” The TLAC standard was designed and approved
Bank launched its technology firm in December 2015, by the Financial Stability Board - an international body
six domestically listed commercial banks, most of which that monitors and makes recommendations about the
are national joint-stock commercial banks, have set up global financial system, in 2015, for global systemically
their own tech subsidiaries. China Construction Bank, important banks (G-SIBs), to ensure they have sufficient
the country’s second-largest State-owned commercial loss-absorbing and recapitalization capacity if they fail. It
lender by assets, held an opening ceremony in Shanghai aims to minimize impact on financial stability and avoid
in April 2018 for its own tech subsidiary, which has a exposure of public funds to losses. Required by the new
registered capital of 1.6 billion yuan (US$251 million). standard, the minimum requirement for the instruments
According to a report issued by global accounting and and liabilities that should be readily available for bail-in
consulting firm EY (formerly Ernst & Young), 35 of the within resolution at G-SIBs should be at least 16 percent
41 listed banks in the Chinese mainland it reviewed of their risk-weighted assets as of Jan 1, 2019. The central
talked about the specific application of fintech in their bank’s announcement also clarified that “when it comes
businesses in their 2017 annual reports. EY said that to resolution, the capital supplement bonds can be
shows that listed banks are accelerating their efforts written down or swapped into equities”. It means the
to deeply integrate fintech into their banking business country could soon issue a new type of bond designed
(Jiang, Commercial Banks). with specific conditions when it needs to be swapped
into equity as the bail-in procedure starts, or the special
Early in 2018, China’s central bank announced it would type of the so-called tier-two capital supplement bond,
improve the framework of regulation underpinned according to Lu Zhengwei, an economist with the
by monetary policy and macro-prudential policy. Industrial Bank. It is also possible to create a type of
The improvements were made partly by stepping up bond without fixed maturity in the future, he said. As
supervision over shadow banking and real estate finance China’s financial regulation has been further tightened
to fend off financial risks. Such a regulation, known as a during 2018, especially to limit the less-transparent and
“two-pillar” policy framework, was established in 2017 high risky shadow banking activities, commercial banks
to better dissolve systemic risk and ensure financial are facing increased pressure on capital management -
stability. Under the system, liquidity became more which is usually one of the central approaches to prevent
stable, cross-border capital flow more balanced and risks. Chinese banks are actively exploring alternative
off-balance sheet wealth management products better financing channels to improve their capital management
supervised. The People’s Bank of China (PBOC) also capabilities and promote the efficient use of capital.
said it would maintain a prudent and neutral monetary According to data from China Banking Regulatory
370
Corp Ltd in May 2018. The move follows in the footsteps policy, and direct more capital into key economic
of five other listed commercial banks, such as China areas and weak links, such as rural vitalization and
Construction Bank Corp, China Merchants Bank Co poverty relief. More efforts would made to improve
Ltd and Industrial Bank Co Ltd. Apart from exploring a disposal of bond defaults, and unify rules on approval
market-driven mechanism for the commercialization of and information disclosure of corporate credit bond
scientific research achievements, the tech subsidiaries of issuance. The central bank also listed financial services
these banks also aim to export fintech solutions to smaller in home rentals, establishment and improvement of
banks and other financial institutions. Minsheng Fintech a long-term mechanism on supervision over online
will mainly serve its parent bank and its subsidiaries finance and on risk prevention, and opening up of the
and partners. In addition, it will provide solutions bond market as important tasks in 2018 (Xinhua, Central
and products to small and medium-sized financial Bank to Improve).
institutions, private enterprises and microenterprises to
facilitate their fintech transformation. Niu Xinzhuang, The PBOC also encourage financial institutions
executive director of Minsheng Fintech, said the belonging to the banking sector to issue creative and new
tech subsidiary will establish an effective corporate types of bonds to supplement capital ahead of the tighter
operating mechanism and form a whole new incubation international regulatory standards that would come into
system for tech innovation. It also plans to build flexible effect from Jan 1, 2019. An announcement published
and efficient mechanisms for hiring, training and on the PBOC website said that “financial institutions
incentivizing talented professionals. These efforts are a belonging to the banking sector can explore and issue
bid to forge fintech into a core competency of the bank, bonds to enhance their total loss-absorbing capacity
he said. Ever since Fuzhou-headquartered Industrial (TLAC).” The TLAC standard was designed and approved
Bank launched its technology firm in December 2015, by the Financial Stability Board - an international body
six domestically listed commercial banks, most of which that monitors and makes recommendations about the
are national joint-stock commercial banks, have set up global financial system, in 2015, for global systemically
their own tech subsidiaries. China Construction Bank, important banks (G-SIBs), to ensure they have sufficient
the country’s second-largest State-owned commercial loss-absorbing and recapitalization capacity if they fail. It
lender by assets, held an opening ceremony in Shanghai aims to minimize impact on financial stability and avoid
in April 2018 for its own tech subsidiary, which has a exposure of public funds to losses. Required by the new
registered capital of 1.6 billion yuan (US$251 million). standard, the minimum requirement for the instruments
According to a report issued by global accounting and and liabilities that should be readily available for bail-in
consulting firm EY (formerly Ernst & Young), 35 of the within resolution at G-SIBs should be at least 16 percent
41 listed banks in the Chinese mainland it reviewed of their risk-weighted assets as of Jan 1, 2019. The central
talked about the specific application of fintech in their bank’s announcement also clarified that “when it comes
businesses in their 2017 annual reports. EY said that to resolution, the capital supplement bonds can be
shows that listed banks are accelerating their efforts written down or swapped into equities”. It means the
to deeply integrate fintech into their banking business country could soon issue a new type of bond designed
(Jiang, Commercial Banks). with specific conditions when it needs to be swapped
into equity as the bail-in procedure starts, or the special
Early in 2018, China’s central bank announced it would type of the so-called tier-two capital supplement bond,
improve the framework of regulation underpinned according to Lu Zhengwei, an economist with the
by monetary policy and macro-prudential policy. Industrial Bank. It is also possible to create a type of
The improvements were made partly by stepping up bond without fixed maturity in the future, he said. As
supervision over shadow banking and real estate finance China’s financial regulation has been further tightened
to fend off financial risks. Such a regulation, known as a during 2018, especially to limit the less-transparent and
“two-pillar” policy framework, was established in 2017 high risky shadow banking activities, commercial banks
to better dissolve systemic risk and ensure financial are facing increased pressure on capital management -
stability. Under the system, liquidity became more which is usually one of the central approaches to prevent
stable, cross-border capital flow more balanced and risks. Chinese banks are actively exploring alternative
off-balance sheet wealth management products better financing channels to improve their capital management
supervised. The People’s Bank of China (PBOC) also capabilities and promote the efficient use of capital.
said it would maintain a prudent and neutral monetary According to data from China Banking Regulatory
370
