June 3, 2009. -- Financial innovation and regulation, as well as the 'Shanghai IFC drive' were among the issues discussed today during the "Shanghai and City of London High-level Dialogue". Jointly sponsored by the City of London Corporation, Shanghai Municipal Office of Finance Service, and the CEIBS Lujiazui International Finance Research Centre, the event was held at Three on the Bund, in Shanghai.
From left: Alderman Ian Luder, Tu Guangshao and Wu Xiaoling.
Wu Xiaoling, Director of CEIBS Lujiazui International Finance Research Centre and former Deputy Governor of People's Bank of China, the country's central bank, delivered a keynote speech at the meeting. According to Wu, the financial sector has increasingly shown a trend towards universal banking, along with deepening financial innovation. Therefore, to conduct cross-sector regulation, those who provide financial oversight should follow three principles of integrated regulation:
1) to deliver integrated regulation by function, i.e., the responsible regulator for certain products should be determined by the nature of product itself, instead of by the nature of its issuing institution;
2) to conduct consolidated supervision over financial institutions. Wu believes that, in the U.S., the financial crisis had exposed serious problems in the off-balance-sheet activities. She suggested integrating the regulation of off-balance-sheet products into the on-balance-sheet regulation so as to greatly reduce financial risks; and,
3) to set capital requirements for financial institutions (except for the pure intermediary and brokerage businesses), and thus put restrictions on their leverage rate. One of the major causes of the sub-prime crisis was that some financial institutions and VCs shunned the capital demand and shifted part of the business off the balance sheet, overlooking their risk tolerance.
Wu Xiaoling and Alderman Ian Luder exchange business cards.
During his address, Alderman Ian Luder, the Lord Mayor of the City of London, pointed out that integrated international regulation didn't mean the establishment of an integrated regulator, but an internationally unified regulatory principles and criteria on financial products. The City of London is Honorary Member Institution of the Board of CEIBS Lujiazui International Finance Research Centre.
In addition to the delegation from the City of London, others who participated in the discussions include Tu Guangshao, Vice Mayor of Shanghai, as well as representatives from:
- Shanghai Municipal Office of Finance Service,
- Shanghai Stock Exchange,
- Shanghai Futures Exchange,
- Bank of Communications,
- China Banking Regulatory Commission Shanghai Office,
- China Securities Regulatory Commission Shanghai Office,
- Huangpu District Government, and
- Pudong New Area Government.
CEIBS Lujiazui International Finance Research Centre (CLFC) was initiated by China Europe International Business School (CEIBS) and Shanghai Lujiazui (Group) Company Ltd. in October 2007. Based in Shanghai, an emerging financial hub, the CLFC will serve as an open and international platform for academic exchanges while focusing on studying the financial industry's development and the improvement of the relevant regulatory system. It will also provide first-class consulting and training services to financial institutions, regulators and legislators.
The CLFC is committed to being an influential think tank for the development of Shanghai as an international financial centre and a platform for China-EU academic exchanges. The Director of the CLFC is Ms. Wu Xiaoling, who is also Deputy Director of the Financial and Economic Affairs Committee and Standing Committee Member of National People's Congress as well as Former Deputy Governor of the People's Bank of China.
The CLFC regularly organizes Finance Salons as high-end platforms for scholars and executives from the financial industry to communicate with each other and discuss topical issues.
For more information of CLFC, please visit www.ceibs.edu/clfc/
