Established as part of the government reorganisation announced at this year's National People's Congress, the CBRC will take over the role of bank regulator from the People's Bank of China. Although this is a sign of the government's commitment to establish healthier banking practices among mainland banks, don't expect the CBRC to fix China's banking problems any time soon.
The CBRC will become the key regulator for banks, asset management companies, ITICs and other deposit-taking financial institutions such as credit unions. The establishment of the CBRC follows the creation of other industry supervisory bodies, such as the China Insurance Regulatory Commission and the China Securities Regulatory Commission.The goals of these bodies include managing the modernisation of each industry and integrating foreign companies and investment into the domestic market. Foreign businesses generally give these commissions high marks for their industry knowledge, and it is likely that at the top, at least, the CBRC will add respected banking figures to its ranks. But industry regulatory commissions are just one of the many layers of government oversight bodies involved in regulation. The CBRC will not necessarily simplify the regulatory process for foreign banks.
Neither will the CBRC solve China's biggest banking problem – non-performing loans on the books of state-owned banks. This will be the responsibility of the State Council and the Ministry of Finance. More important, the CBRC will not provide the impetus to change the system that creates such loans – the responsibility of state banks to support unproductive SOEs and unsophisticated risk management techniques among state banks.
In the short term, however, the CBRC faces more pressing challenges before it can be established officially. Due to legal provisions that delegate bank regulatory authority to the Central Finance Committee, the CBRC cannot presently regulate the banking industry. It is likely that the National People's Congress standing committee will pass a law legally declaring the functions of the CBRC and thereby clear the way for its establishment. This way, the CBRC can begin work on banking regulations and the government will be allowed more time to make major amendments to the People's Bank of China Law and Commercial Banking Law.
Over time, and in conjunction with other reforms, the CBRC will help the banking industry to modernise, but do not expect any major short-term impact. The impetus for that reform must stem from high-level bureaucrats and the bank executives themselves.
Name Liu Mingkang
Born 1946 in Shanghai
Education MBA from City College of London
Career More than 20 years of banking experience with Bank of China.
1994-98 vice president of National Development Bank; 1999-2000 chairman of Everbright Bank; 2000-03 chairman of Bank of China. Strengths Liu is a qualified international banker with the technical expertise and people skills to do the job well. He is a product of Bank of China's rigid promotion system, and learned international banking practices while stationed at its London branch.When the bank's Hong Kong listing was threatened in 2002 by an investigation into its New York branch, Liu played a key role in keeping the launch on track and maintaining public confidence.