(Yicai Global) June 21 -- China's central bank, the People's Bank of China (PBOC), does not need to bail out a small number of banks, said Xu Zhong, head of the PBOC research bureau, at the Lujiazui Forum 2017 held in Shanghai June 20-21.
If the central bank is to provide crisis relief as the lender of last resort, it requires institutions' coordinated efforts with all financial regulators, Xu underlined. Institutions with liquidity difficulties should ensure the quality of collaterals. It is difficult for the bank to bail out any institutions if they don't participate in related regulatory operations and refuse to share information with regulators, he warned.
Regulators' responsibilities should match their powers, he continued, but there is a supply-demand imbalance in financial regulation. Financial regulation is a public product, but regulations cannot be conducted free of any cost. 'Rent-seeking' activities exist in financial market. There are rent-seekers, leading to lower efficiency of resource allocation. By rationalizing shared responsibility and effectively enforcing accountability and punishment rules, fundamental regulation objectives can be achieved. A mismatch between powers of a regulator and its responsibilities may lead to serious abuse of power, so it is unrealistic to expect financial regulation to be based purely on responsibility without giving regulators any authority, he said.