As part of China’s efforts to strengthen credit-based financial regulation and guard against financial risks, the National Financial Regulatory Administration issued trial regulations on the management of the list of entities with serious credit violations. The rules will take effect on Oct 1.
An official at the NFRA said China’s top financial regulator formulated these rules to standardize the management of the list of entities with serious credit violations in the financial sector, strengthen credit-based supervision, continuously improve mechanisms for preventing and defusing financial risks, and maintain good order in financial markets.
The regulator said the move will help strengthen penalties for illegal and non-compliant conduct, enhance the effectiveness of financial regulation, and guide market entities to strengthen their awareness of conducting business with integrity.
The NFRA said the scope of entities to be included on the list is defined with due caution. Financial institutions and their employees subject to administrative penalties or other measures imposed by the NFRA or its local offices shall be included on the list in instances where the nature of the violation is particularly egregious and the circumstances are particularly severe.
The regulations specify three categories of circumstances under which entities may be included on the list, the official said.
The first category involves cases where an entity has been subject to administrative penalties such as “revocation of a legal entity’s business or operating license; cancellation or revocation of lifetime eligibility for office; a lifetime ban on working in the banking sector; or a lifetime ban on entering the insurance industry”.
The second category involves cases where an entity has been subject to severe administrative penalties, restrictions on market access, orders to transfer equity interests, or revocation of administrative permits, thereby seriously disrupting fair market competition and normal social order.
The third category covers cases where a party — despite having the ability to fulfill its obligations — refuses to do so or evades the enforcement of administrative decisions, thereby seriously undermining the credibility of financial regulatory authorities, and for which a people’s court has issued a ruling for compulsory enforcement.
In accordance with relevant laws, regulations, and policy documents issued by the Central Committee of the Communist Party of China and the State Council, the recently issued regulations specify the administrative measures that the NFRA and its local offices may take against entities included on the list.
The procedures for managing the list are strictly standardized. Specific procedures for inclusion on and removal from the list are stipulated, along with procedures such as prior notification and the right to present statements and defenses, thereby fully safeguarding the relevant entities’ rights to be informed and to defend themselves, the NFRA said.
Additionally, the financial regulator will establish a credit repair mechanism. Parties included on the list are encouraged to correct their untrustworthy conduct, eliminate adverse effects, and apply for credit repair.
Tanks to chinadaily.com.cn
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