China is planning to increase the number of financial companies tagged as systemically important, Bloomberg News reported Oct. 10, citing people familiar with the matter.
The People's Bank of China is leading regulators in identifying banks, insurers and brokerages that may be deemed too big to fail. Regulators will initially short-list at least 50 companies to be included in the list.
Companies tagged as systemically important financial institutions will face additional capital requirements, and may be subject to additional rules on leverage, risk exposure and information disclosure, the people said.
Chinese authorities currently identify 20 banks as systemically important.
The move is seen as a way for the government to strengthen oversight on the country's US$40 trillion financial system. However, the additional capital requirement could restrict large financial institutions' ability to lend, potentially resulting in higher defaults and additional pressure on the country's currency and stock markets, the report said.
The central bank did not immediately reply to Bloomberg's request for comment.