Improving the Modern Financial Regulatory System and Enhancing Financial Service Capabilities

Summary

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• Guidelines on Green Finance for Banking and Insurance Industries promulgated by the China Banking and Insurance Regulatory Commission (CBIRC) along with the amended Measures for Regulatory Assessment of the Corporate Governance of Banking and Insurance Institutions set out more comprehensive rules applicable to banking and insurance institutions, as part of China's transition to a sustainable and resilient economy.
• Banking institutions have clearer guidelines on the overseas loan business with the Circular on Matters Relevant to the Overseas Loan Business of Banking Financial Institutions issued by the People's Bank of China (PBOC) and the State Administration of Foreign Exchange (SAFE) coming into force, which promotes the financial service capabilities of banking institutions and echoes the "Go Global" strategy.
• Preserve financial stability, develop mitigation mechanism for financial risk and facilitate the legislation of Financial Stability Law.

2022 was an extraordinary year. The Russia-Ukraine war, COVID-19 and inflation worldwide have brought uncertainty to the steady development of the global economy. Despite challenges along the way, China strives for progress while maintaining stability by continuously improving the supervision of the financial industry, enhancing the ability to prevent and resolve risks, introducing environment, social and governance (ESG) requirements in the banking regulatory guidelines, and vigorously developing green credit and green financial bond businesses. At the same time, China is regulating the offshore lending business of domestic banks and further enhancing the financial service capabilities of cross-border business in the banking sector.

1 .  Implementing ESG in the development of banking and finance industries

With the Chinese government proposing the Dual Carbon Goals of achieving Carbon Dioxide Peaking in 2030 and Carbon Neutrality in 2060, banks play an increasingly important role in achieving the Dual Carbon Goals. Financial stability necessitates higher requirements for banks' internal corporate governance. In 2022, The China Securities Regulatory Commission (CSRC) officially incorporated ESG into investor relations management, raising the requirements for ESG information disclosure. Forty-nine out of 54 listed Chinese banks have made environmental and climate disclosures in the form of social responsibility reports, sustainability reports or explicit ESG reports. In the 2022 ESG rating results published by the international authoritative index agency, Morgan Stanley Capital International (MSCI), the overall ESG rating of China's banking institutions has increased. Among them, all six large state-owned banks were rated A, which is currently the highest level for listed banks. Incorporating the ESG factors into the development of banking and finance industries have become an inevitable trend in the future.