Proposed revision of the People's Bank of China Law to improve the framework of macro-prudential oversight.

The draft amendment to the Law of the People's Republic of China on the People's Bank of China was submitted for initial review at a meeting of the Standing Committee of the National People's Congress on June 23. The amendment aims to accelerate the improvement of the central bank system, further enhance the framework of macro-prudential regulation, coordinate development and security, and firmly uphold the bottom line of preventing systemic financial risks. The Law of the People's Bank of China is the basic law in China that establishes and regulates the central bank system. It has played an important role in safeguarding the formulation and implementation of monetary policy, as well as establishing and improving the central bank's macroeconomic regulation system. With changes in China's financial industry in recent years, the current Law of the People's Bank of China no longer meets the needs of development, and the system of macro-prudential management needs to be strengthened, requiring modification and improvement. PBOC Governor Pan Gongsheng, entrusted by the State Council, explained the amendment at the meeting. The draft amendment consists of 8 chapters and 54 articles, implementing the spirit of the Central Financial Work Conference, accelerating the improvement of the central bank system, and further clarifying the functions and positioning of the People's Bank of China to enhance its efficiency. The draft enriches the overall requirements of central bank work, emphasizing the People's Bank of China's adherence to the centralized and unified leadership of the Party Central Committee in financial work, implementing the Party and state's line, principles, policies, and decisions, and coordinating development and security. It also improves the basic management system of the central bank, supplements and improves the duties of the People's Bank of China based on practice, and clarifies the legal status of the digital currency DigiHuman. Monetary policy and macro-prudential policy are the twin pillars of financial regulation. The draft establishes the legal status of the People's Bank of China's monetary policy and macro-prudential policy, clearly stating that the People's Bank of China leads the establishment of the macro-prudential policy framework, jointly formulates macro-prudential policies with relevant departments of the State Council, fills the legal gap in the macro-prudential system, and further strengthens the framework of the macro-prudential system. In terms of maintaining financial stability, the draft specifies the People's Bank of China's regulatory responsibilities for the money market, bill market, and relevant financial infrastructure, allowing it to take counter-cyclical and cross-cyclical adjustment measures as needed to maintain financial market stability. To enhance the effectiveness of central bank supervision, the draft also improves the provisions on the People's Bank of China's inspection and supervision of financial institutions and other relevant entities in implementing monetary policy, setting stricter legal responsibilities for violations and increasing the cost of violations.