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'Index System' Coming Soon
China is getting ready to launch a national safety net called the "index system" to ward off possible financial risks in the future, a senior financial official said recently.
The index system, the detailed standards of which will be drafted by the People's Bank of China (PBOC), will be used to identify and indicate the levels and development of possible risks facing the country's financial sectors, said Cai Ersheng, president of the Shanghai branch of the central bank.
The three-level system will likely be comprised of a cautious sub-index system, aimed at safeguarding the stable operation of commercial financial institutions; an external environmental sub-index, used to supervise the overall development of external environments for growth of the financial sector; and a sub-market index system that will monitor the macro-changes of the entire market.
"The preliminary stages of the system have already been developed," Cai said.
The development of the index system has been billed as a concrete move on the part of the central bank, which is seeking to improve the efficiency and effectiveness of its supervision over the country's financial institutions leading up to China's entry into the World Trade Organization, an event that is likely to bring many new challenges to the country's financial sector.
Cai said China will employ expertise from developed countries in the establishment of the system.
He noted that the additional implementation of a federation conference system between the supervising bodies of the banking, insurance and securities sectors would also help the country to ward off the possible financial risks.
Proper links and communication between these three financial sectors would be an efficient way to secure a healthy growth of the overall financial sector, he said.
According to Cai, a national system capable of rating commercial financial institutions' will also be launched after the full deregulation of the country's interest rate on both the local renminbi and foreign currency likely to happen within the next three years.
Although Cai refused to reveal the details of this potential system, he claimed it will give the parties concerned appropriate means for risk-controls.
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