China seeking British advice about merger of regulators

Chris Hamblin

17 May 2016

As before, details of the progress of the Chinese plans are sketchy. One option seems to be off the table - a return to the regime that existed in China before 2003, when the People's Bank of China regulated all banks. A merger of the other three main regulators - the China Banking Regulatory Commission (CBRC), the China Insurance Regulatory Commission (CIRC) and the China Securities Regulatory Commission (CSRC) is also therefore a non-starter. Although no press reports say so, one of the problems of any merger of regulators under the aegis of a central bank is that it might lead market participants to believe falsely that the central bank will come to their rescue in the event of regulatory failure. One of the causes of China's stock market crash of last year, along with a lack of co-operation between regulators and the 'circuit-breaking' blunders of CSRC chief Xiao Gang, who left his job early in February and said "the only thing in life I've done right was to marry my wife," was an unfounded belief that government financial backing would be made available. The Chinese choice of the UK no doubt stems from a conviction that Britain has learnt from its mistakes during the crisis of 2008, when inter-agency co-operation was very weak.

Sources close to the talks do, however, think that the merger of the CBRC, the CIRC and the CSRC is a distinct possibility. The merged regulator might report directly to the politburo, or to the CBRC which, in turn, reports to that body. Apparently China has sent more than one delegation to the UK to examine its system.