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E-mail China.org.cn, March 22, 2024
Yicai:
Mr. Wu Qing, chairman of the China Securities Regulatory Commission, stated at a press conference during this year's "two sessions" that enhancing the construction of the intrinsic stability mechanism in the capital market includes, at least, "one bedrock " and "five pillars." Among these, higher-quality professional services are one of the pillars. In the previously mentioned opinions regarding strengthening oversight over institutions, what are the key measures for promoting the securities and fund institutions to better play their roles to provide higher-quality services? Thank you.
Shen Bing:
Thank you for your question. In our recent announcement regarding the strengthening of regulation for securities firms and public funds, and the accelerated cultivation of first-class investment banks and institutions, we have outlined the development goals for the securities and fund industry. Specifically, we have identified 25 key measures, focusing on phased tasks for the next five years. These measures provide a timetable, roadmap and blueprint for expediting the cultivation of first-class investment banks and institutions. Allow me to provide a brief overview:
First, we aim to rectify the positioning of institutions in the industry. There are gaps in terms of operational concepts, functional effectiveness, governance levels, compliance awareness and other aspects within the institutions in the industry according to the requirements set forth in the Central Financial Work Conference for cultivating first-class investment banks and institutions. The issuance of the opinions this time emphasizes the need to strengthen the leadership of the Party. Through measures such as improving classification evaluation and risk control indicator systems, institutions in the industry are urged to rectify their operational concepts and prioritize functionality, while consistently adhering to the development principle of financial services for the nation and the people.
Second, we aim to enhance corporate governance. Sound and robust corporate governance and compliance risk control are crucial for financial institutions. The opinions systematically put forward requirements for the governance framework of institutions in the industry. For instance, the document highlights the need for a clear equity structure, streamlined organizational structure, well-defined responsibilities, comprehensive information disclosure, reasonable incentive and restraint mechanisms, effective internal controls, and an architectural framework conducive to fostering ethical conduct within the industry. Additionally, institutions in the industry are required to improve mechanisms for preventing conflicts of interest such as related-party transaction management. For high-risk businesses, the principle of "if it cannot be properly supervised, it should not be conducted" should be adhered to. It is essential to enhance assessment mechanisms for compliance risk control and implement the requirements of comprehensive risk management and compliance management across organizations.
Third is to promote cultural progress. In recent years, some practitioners in the sector have led lavish lifestyles, seeking short-term successes and quick profits while flaunting their wealth. Such harmful trends severely damaged the reputation of the sector. Now "The Opinions" urges related financial institutions to vigorously advocate and implement the five financial ethics of Chinese characteristics, which are being honest, fulfilling social responsibilities, exercising prudence, innovating while upholding traditional values and abiding by the law. Vetting and regulation procedures should be strengthened in key processes such as enrollment and appointment. Practitioners with unlawful or immoral behaviors should be removed from the sector with firm resolve. Supervisory bodies should enhance accountability and punitive measures, improve information disclosure regarding penalties and better utilize practitioners' credit records, so as to legally and rigorously prevent law-breaking personnel from continuing to work in the profession. In collaboration with other departments in charge of related work, the supervisory bodies should also continue to improve the salary management system for the sector. Different parties should poll strengths to quickly create an environment of strict disciplines for industry practitioners in order to maintain a good reputation of the sector.
Fourth is to level up the capacity for providing professional services. This is key to cultivating top-notch investment banks and other investment institutions. "The Opinions" urges related financial institutions to focus on their primary responsibilities and core businesses, and focus on playing their important functions of ensuring stable and sound performance of the financial market, discovering value and curbing risk, facilitating the inflow of medium- and long-term capital to the market, improving long-term returns for investors, and supporting the high-standard opening-up of the financial market. For this purpose, we will provide oversight and recommend to related financial institutions that they strengthen core capabilities, optimize financial services and product supplies and provide products and services that truly suit investors. Also, we will offer support to realize the strategic plans that promote technology-related financing, green financing, inclusive financing, pension financing and digital financing. Thank you.
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