Chinese investors have come to expect that Beijing will step in to help any bank when troubles mount. That may not remain the case.
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China’s too-big-to-fail banking rules are heading in the right direction.
Chinese regulators published new guidelines on Tuesday for supervising the nation’s financial institutions. Of course, Beijing owns most big lenders, and failures are almost unheard-of. But the very act of indicating which ones should be saved in a disaster means that others may be allowed to fail: That’s a step toward liberalizing a nearly $40 trillion banking industry.
The latest framework will label several more Chinese banks, securities firms and insurers as “systemically important,” meaning that they are so vital and connected that the collapse of just one could trigger a crisis.
