After a lapse of more than ten years, another important law in the financial industry ushered in a major overhaul.
A few days ago, the People’s Bank of China drafted and issued the Law of the People’s Republic of China on the People’s Bank of China (Revised Draft for Comment) (hereinafter referred to as the Draft for Comment), making it clear that any unit or individual is prohibited from making and selling digital tokens, which does not involve the monetization of the fiscal deficit. The upper limit of fines will be raised to 20 million yuan, and the statutory duties of the central bank will be greatly expanded.
This revision emphasizes financial services to the real economy, strengthens financial macro-control, and modifies and improves the responsibilities of the central bank; Establish a dual-pillar regulatory framework of monetary policy and macro-prudential policy, improve the overall supervision system of systemically important financial institutions, financial holding companies and important financial infrastructure, and increase penalties for financial violations.
"This is a major revision." Dong Ximiao, chief researcher of Zhaolian Finance, said in an interview with China Business News that under the background of major changes in the current international and domestic economic and financial environment, amending the Law of the People’s Bank of China with the times and strengthening the responsibilities of the People’s Bank of China in macro-prudential supervision and prevention of financial risks will help improve the system construction, create a more suitable legal environment for preventing and resolving financial risks and maintaining financial stability, and also help promote the financial industry to better serve the real economy.
According to the central bank, the revision of the Law on the People’s Bank of China is necessary for building a modern central banking system and preventing and resolving systemic financial risks, and it is also in line with the trend of international financial regulatory reform.
Establish a macro-prudential policy framework
The Draft for Comment includes general provisions, organization, RMB, business, supervision and management responsibilities, supervision and management measures, financial accounting, legal responsibilities and supplementary provisions, with a total of 9 chapters and 73 articles.
From the content, it mainly involves eight aspects: emphasizing financial services to the real economy and strengthening financial macro-control. The responsibilities of the People’s Bank of China have been revised and improved. Establish a dual-pillar regulatory framework of monetary policy and macro-prudential policy. Improve the overall supervision system for systemically important financial institutions, financial holding companies and important financial infrastructure. Give further play to the role of the People’s Bank of China in maintaining financial stability and preventing and handling systemic financial risks.
And, improve the RMB management regulations, improve the governance system of the People’s Bank of China, improve the means of performing duties of the People’s Bank of China, and increase penalties for financial violations.
In terms of revising and improving the functions of the People’s Bank of China, it is clear about drafting major laws and regulations of the financial industry, formulating the basic system of prudential supervision, taking the lead in taking charge of systematic financial risk prevention and emergency response, three "overall plans", and organizing and implementing national financial security review.
In establishing a dual-pillar regulatory framework of monetary policy and macro-prudential policy, the monetary policy toolbox has been improved and the flexibility of monetary policy tools has been moderately increased; Establish a macro-prudential policy framework, clarify the macro-prudential policy objectives, focus on strengthening countercyclical regulation and penetrating supervision, and improve the macro-prudential policy toolbox of financial institutions such as countercyclical capital buffer, risk reserve and stress testing.
In this regard, Dong Ximiao told the First Financial Reporter: "This revision has made major adjustments to the responsibilities of the People’s Bank of China, increased the macro-management responsibilities of the financial market and financial system, given the central bank the right to draft major laws and regulations on the financial industry, and coordinated the supervision of important financial institutions, financial holding companies and financial infrastructure. This will help improve the modern central banking system, further strengthen supervision and coordination, better meet the new requirements put forward by the development and changes of the financial situation on the central bank’s responsibilities, and also conform to the changing trend of international financial supervision. "
Provide legal basis for issuing digital currency.
The issue of digital RMB by the central bank has always been the focus of the market, and this revision provides a legal basis for issuing digital currency.
Sun Haibo, president of the Institute of Financial Supervision, recently wrote an article analyzing that the formal inclusion of digital currency in the legal tender form has become the legal basis for digital currency to formally implement it nationwide, which will have a far-reaching impact on the management system reform of the payment system and the internationalization of the RMB.
"Draft for Comment" improves RMB management regulations. Article 19 clearly states that "RMB includes physical form and digital form".
Article 22 stipulates that no unit or individual may make or sell token tickets and digital tokens to replace RMB in circulation in the market.
In addition, Article 65 also provides penalties for making and selling token coupons and digital tokens instead of RMB circulating in the market: The People’s Bank of China shall order it to stop its illegal activities, destroy the illegally made and sold token coupons and digital tokens, confiscate its illegal income and impose a fine of less than five times the illegal amount; If the illegal amount cannot be determined, a fine of not less than 100,000 yuan but not more than 500,000 yuan shall be imposed.
Moreover, in the eyes of the industry, the "Draft for Comment" is equivalent to reaffirming the previous seven ministries and commissions, and at the same time upgrading from legal documents to legal level.
In fact, as early as September 2017, ICO had been sentenced to "death penalty" by supervision. China People’s Bank, China Banking Regulatory Commission and other seven ministries and commissions jointly issued the Announcement on Preventing the Financing Risks of Token Issuance, which indicated that the financing of Token Issuance is essentially an unauthorized illegal public financing, which is suspected of illegal selling of token coupons, illegal issuance of securities, illegal fund-raising, financial fraud, pyramid schemes and other illegal and criminal activities. Since the date of announcement, all kinds of token issuance financing activities shall be stopped immediately. Organizations and individuals that have completed the financing of token issuance shall make arrangements such as repaying, reasonably protect the rights and interests of investors, and properly handle risks.
Xiao Sa, a partner of Beijing Dacheng Law Firm, believes that the "Draft for Comment" accurately locates the illegality of the behavior, and ICO is not only an illegal act but also a crime. After the law is passed in the future, the possible result is that some ICO behaviors or companies that sell tokens will be investigated by criminal law. In the future, the selling behavior, manufacturing behavior and financial behavior of currency circles may be identified as crimes.
No mention of monetization of fiscal deficit, raising the upper limit of fines
During the epidemic, "monetization of fiscal deficit" became the focus of debate. According to the existing laws and regulations, the People’s Bank of China may not overdraw the government’s finances, and may not directly subscribe for or underwrite government bonds and other government bonds.
Judging from the "Draft for Comment", this revision does not involve the monetization of fiscal deficits, and once again emphasizes the independence of monetary policy.
Article 32 stipulates that the People’s Bank of China shall not overdraw the government finances, and shall not directly subscribe for or underwrite government bonds and other government bonds. The People’s Bank of China shall not provide loans to local governments and government departments at all levels, nor to non-bank financial institutions and other units and individuals, except that the State Council has decided that the People’s Bank of China may provide loans to specific non-bank financial institutions.
Wang Yuling, president of Wuhan Branch of the People’s Bank of China, previously said that at present, the effect of direct access of monetary policy to the real economy is emerging. With the deepening of supply-side structural reform, the coordination between monetary policy and fiscal policy is constantly strengthened, and the blocking point of financial support for the real economy will be further opened. There is no need to adopt the extreme policy means of monetizing fiscal deficit. The revision of laws should not only meet the needs of economic development, but also maintain certain stability and create stable expectations for the market. The system that the central bank and the finance perform their respective duties and have clear boundaries is suitable for the current needs.
Dong Ximiao believes that adhering to the requirement that "the People’s Bank of China shall not overdraw the government finances, and shall not directly subscribe for or underwrite government bonds and other government bonds" is the bottom line requirement for serious financial discipline, preventing the monetization of deficit problems, inflation and asset bubbles. From a practical point of view, China adheres to the normal monetary policy, and the monetary policy space is still large, so it is not necessary to implement unconventional monetary policies such as direct purchase of government bonds.
In addition, the Draft for Comment stipulates that one of the monetary policy tools that the People’s Bank of China can use is to provide loans to commercial banks, rural credit cooperatives, rural cooperative banks, policy banks and development banks. Compared with the current law, the expression of providing loans to credit cooperatives, policy banks and development banks is added.
In addition, in the expression of monetary policy, the original "determining the benchmark interest rate of the central bank" was changed to "determining the policy interest rate of the central bank". Sun Haibo believes that mainly due to the interest rate marketization reform, the central bank loan has cancelled the guiding interest rate and changed to LPR pricing, and the future deposit marketization is still expected.
In view of the low cost of illegal activities in the financial market, the "Draft for Comment" increased the punishment for financial illegal activities, and stipulated that the punishment for serious illegal activities could be aggravated, and the upper limit of the fine was raised to 20 million yuan; The institutions that have obtained the approval of the People’s Bank of China shall be ordered to suspend their business, revoke their licenses, and be banned from the market.
Dong Ximiao said that the direction and principle of strengthening strict financial supervision in the Revised Draft remain unchanged, giving the People’s Bank of China the right to inspect and investigate, and greatly increasing the punishment for financial violations. Setting up Chapter VI "Supervision and Management Measures" and giving the central bank the power to inspect and supervise financial institutions and other units and individuals will help the central bank to better perform its duties and enhance its authority and supervision effectiveness.