China’s Banking Regulatory Authority Takes Measures to Ensure Financial Stability

The State Council’s banking regulatory authority has taken decisive steps to ensure the stability of China’s financial system by empowering itself to take over or restructure banks experiencing significant difficulties.

Empowered to Intervene in Troubled Banks

According to Article 38 of the Banking Regulation Law, if a bank is experiencing or likely to experience a credit crisis, the banking regulatory authority may:

• Take control of the institution
• Assist in its restructuring

This measure aims to protect depositors and other customers by preventing the bank’s collapse.

Closure of Banks Engaging in Serious Violations

The law also empowers the banking regulatory authority to close banks that have been found to engage in serious violations of the law or regulations, or those that pose a grave danger to financial order or threaten public interests (Article 39).

Directors and Senior Managers Held Accountable

In addition, the authority has been granted the power to require directors and senior managers of troubled banks to perform their duties according to its requirements (Article 40). In extreme cases, it can take measures such as:

• Prohibiting the departure from China of individuals directly responsible for the bank’s problems
• Freezing their assets

Inspecting Deposit Accounts and Freezing Funds

The banking regulatory authority has also been granted the power to inspect deposit accounts and request the freezing of funds suspected to be illegally obtained (Article 41).

Supervisory Staff Face Consequences for Wrongdoing

According to Article 42, supervisory staff who commit wrongdoing may face:

• Administrative sanctions
• Criminal liability

Banks Face Penalties for Violations

Banks that violate the law or regulations are subject to a range of penalties. According to Article 43:

• Operating without authorization can result in closure by the banking regulatory authority
• Fines ranging from 500,000 yuan to 2 million yuan may be imposed for non-criminal violations
• Suspension of business for consolidation or revocation of their banking permit may be ordered for more serious violations
• In extreme cases, corrective measures and fines may be required

Prudential Regulation Violations May Result in Penalties

Banks that fail to comply with prudential regulations or requirements may face penalties ranging from 200,000 yuan to 500,000 yuan (Article 45).

Corrective Measures Taken

The banking regulatory authority has taken swift action to address concerns about the stability of China’s financial system. According to an official statement: “We will continue to monitor the situation closely and take all necessary steps to prevent credit crises and protect depositors and other customers.”