China's regulators told to promote transparency, reduce complexity

[HONG KONG] A global financial watchdog has warned China's regulators to work together more closely, clearly define their roles, and promote transparency to improve risk management in the financial system. "A unifying theme behind the peer review recommendations is the need for closer coordination and information sharing between the authorities to handle a dynamic financial system," the Financial Stability Board (FSB), the international regulatory body comprised of central banks wrote in a report published late on Thursday.

It comes as Chinese policymakers attempt to stabilise the stock market through a series of interventions that have raised questions over China's complex regulatory structure.

The multiple regulatory agencies that oversee stock markets, banks, insurers, capital inflows and outflows, and fiscal and monetary policy, have overly broad mandates and are not joined up, leading them to sometimes pursue policy measures that contradict one another, the FSB said.

The FSB recommended that regulatory agencies review their protocols for sharing information, clarify their mandates, and to reduce uncertainty by making more policy- and decision-making information public. "Market participants' expectations about the policy stance need to be anchored around a cleary understandable framework in order to avoid turbulence caused by policy uncertainty," the FSB report said.

China's regulatory system is under intense scrutiny in the wake of a dramatic stock market sell-off that has seen the country's main indices fall around 24 percent since mid-June.

Market participants have said the regulatory response to the crisis was poorly coordinated, heightening investor uncertainty and contributing to the crash's severity.

The FSB, of which China is a member, is tasked with monitoring global systemic risk. China was last reviewed in 2011 and has since made improvements, the FSB noted, adding that China is not alone in having regulatory coordination problems.

The Information Office for China's State Council, which helps oversee regulatory coordination, did not immediately respond to a request for comment.

REUTERS