by the Assistant Governor of the People’s Bank of China,Chairperson of China Finance Standardization Technical Committee
With the rapid development of global economic integration, standards have become important methods and technical ties in the modern international economic competition and cooperation, and also important and strategic tools for improving overall competitiveness. Standardization is an activity in which commonly and repeatedly used items for existing issues and unknown issues are established to maintain the best order. As a science, it has been gradually established during the long term production practice, and it is also an important application technology. Finance is the core of the modern economy, and standardization is one of vital marks for evaluating the competitiveness in the international economy.
After China’s reform and opening-up, the Chinese government has paid much attention to standardization work as a strategic measure to promote the national economy, social development, and independent innovation. In accordance with the national standardization strategy of China, the People’s Bank of China (PBC) carefully oversees the organization, coordination, and management duty from the State Council, meets requirements for financial reform and development, implements finance standardization strategies to improve overall competitiveness of the finance industry, actively coordinates each financial regulation department and each financial agency to establish the China Finance Standardization Technical Committee (CFSTC), determines the objective of perfecting standards, accelerates the adoption of international standards, and implements plans to promote research, release, and implementation of financial standards. The practice proves that the application of financial standards plays a positive role in standardized management of the financial system, promotes technology and management advancement in the financial industry, reduces transaction costs, improves the effects of scale economy, and lays a solid foundation for sound and sustainable financial industry development.
Ⅰ. Main Achievements in Financial Standardization during the 11th Five-Year Plan Period
During the 11th Five-Year Plan Period, the informationization in the financial industry moved toward concentration from dispersion. Data Centralization became the main tendency of informationization development. During this period, financial standard gradually penetrated each area of economic and financial activities, and financial standardization in China developed very fast. From 2006 to 2010, the PBC organized the CFSTC to jointly release and implement a total of 29 financial national standards and 52 financial industrial standards, which respectively accounted for 70.73% of all released financial national standards and 64.2% of all released industrial standards. This is a period with rapid development of financial standardization.
(Ⅰ) Financial Standardization Promoted Financial Informationization
Since the beginning of the new century, Chinese financial institutions have strengthened the application of information technology in operation and management. General Data Element and Code, Data Center, and Interconnection and Intercommunication became important topics in financial informationization. During the 11th Five-Year Plan period, the PBC cooperated with financial regulation departments, collected demands and suggestions from each financial organ, and organized the CFSTC to develop and release a series of standards related to financial informationization. The PBC established and released more other standards, including China Financial Integrated Circuit（IC）Card Specification, Bank Card Specification, Insurance Basic Data Element Catalogue and Bank Card Online Interoperability Technical Specification, covering fundamental data elements, code, interface standards, terminology, messages, data, financial instrument designs, and parameters in printing technology. Related standards have been carried out and reached excellent achievements in bankcard, Internet Banking, accounting, statistics, treasury, information security, and credit investigation, especially standards applied in printing showed a leading international level. Some financial application standards began to show importance in international standard systems. Standardized financial informationization of China has saved significant social resources.
(Ⅱ) Financial Standardization Promoted Development of Finance Service and Related Industries
The application of financial standards in the credit field has greatly improved the credit level in China. In 2006, the CFSTC released Credit Loan Market and Interbank Bond Market Credit Evaluation Specification , a series including three industrial standards. These are issued especially for credit rating industry for the first time.
These standards have strongly supported credit decision making and risk prevention of commercial banks, provided a credit basis for enterprises meeting qualifications for financing in capital markets, created a basis for cultivation and normative development of the rating market, and strongly promoted development of China’s finance market. From 2006 to 2009, the CFSTC released three industrial standards, including Personal Credit Data Element of Credit Investigation Data Element , which promoted the integration of data from different channels and information sharing. At present, the Personal Credit Investigation System and Enterprise Credit Investigation System become major reference facilities on loan granting and financial service, and play a significant role in the Chinese finance industry.
The use of financial standards has laid the foundation for rapid development of China’s bankcard industry. The PBC organized the financial institutions to establish more than 20 standards for bankcard business, technology, and service, including China Financial Integrated Circuit（IC）Card Specification, which played an important role in solidifying bankcard network standard, supporting China’s industrial development in bankcard, and ensuring card safe and convenient. In 2010, the success ratio of multibank transaction was over 99%. Especially the release and implementation of financial IC card standards have greatly enhanced transaction security of bankcard and met the requirements for multi-function cards. This standard has application prospects in the field of public services. The PBC chose Ningbo as the first city in China to run a trial of financial IC cards with multi-application. The application covers many citizen living fields including medical service, transportation, and business and trading.
By far, more than 700 000 cards have been issued, and drove the development of financial IC Card service in other cities. Meanwhile, financial IC Card standard has provided a reference for service and supervision among industries and promoted the application of mobile payment instruments in the financial payment field.
The application of financial standards in the field of electronic payment has promoted development of electronic payment instruments. With the advent of new transactions, products, service fields and management patterns in electronic commerce continuously, transaction scales are increasingly larger, competition and coexistence of the markets have become fierce, and the requirements for data exchange and sharing have become intense. From 2009, the PBC conducted research on standards for electronic payment terminology, code, data element and data format, etc., and developed the relevant standards. This provides a fundamental support for effective strengthening of interconnection and information sharing between banks and non-financial payment agencies, enhancement of risk prevention of each partners, and strengthening administrative department’s supervision and management to commercial banks and non-financial payment agencies.
(III) Financial Standardization is playing an increasingly important role in Macroscopic Prudential Management
Application of financial standards in accounting, statistics and relevant fields provides an important scientific basis for strengthening financial regulation, maintaining financial stability and improving financial service. During the 11th Five-Year Plan, the PBC and financial regulation agencies improved financial accounting and statistics work and strengthened the development and implement of trans-industry standards. For example, to meet requirements many financial standards, Suchas Life Insurance Data Exchange Specification of Bank Insurance Business, Property Insurance Data Exchange of Bank Insurance Business and Information Agency and Design Principle on Transactional Data Exchange between Security & Futures and Banks were released, which reduced market cost for interconnection between banking and securities or insurance, provided technical standards for the PBC and financial regulation agencies to get correct and complete financial statistics timely, reduced “isolated information islands”, and provided basis for establishment and perfecting of China’s financial macroscopic and prudential management system. In 2010, the PBC released Financial Industry Information Security Administrative Regulation and established a list of corresponding financial institutions, which set the premise for follow-up regulatory standards development.
(Ⅳ) Financial Standardization Effectively Ensured Safe and Steady Operation of Finance
With the development of information technology and its widely application in financial industry, technological risks faced in the finance sector are gradually increasing. To avoid risks, the PBC and other financial regulation agencies have developed and implemented information safety standards, which played an active role in measuring, evaluating and reducing risks and potential defects. On the basis of Network Safety Standard among Star Nets in Finance released by the CFSTC in 2004, during the 11th Five-Year Plan period, the PBC and other financial regulation agencies actively implemented this standard, and standardized information security technology, physical environment, personal security and safety operation and management involved in star nets of financial sector. In 2008, Administrative Regulations on Disasters of Banking Information Systems was released to specify the state’s policy on improving the disaster recovery of important information systems. This plays an important role to promote the work of banking information systems disasters recovery, effectively prevent the risk of banking information systems and standardize emergency management of disaster recovery and daily operation and maintenance. The Regulations on Risk Evaluation Index Systems of Insurance Information Safety released in 2010 played a positive role on improving safety management levels of insurance sector in China and preventing financing information risks.
(Ⅴ) Finance Standardization Narrowed the Gap between Finance Sector of China and the Rest of the World
In order to follow standards internationalization, finance sector of China increased participation in international standardization and adoption of international standards. In 2004, China became a participating member in Financing Service Technical Committee of International Standardization Organization (ISO/TC68) and Individual Financial Management Committee (ISO/TC222). This promotes the status of China in international finance standardization organizations. By the end of 2010, by tracking and analyzing 85 standards released by ISO/TC68 and TC222, the CFSTC has developed 28 national standards involving many aspects including financial messages, information security and financial transaction cards, and formed 23 research reports. At present, it realizes simultaneous tracking and transforming of international financial standards. In accordance with operation requirements, the CFSTC also made tracking and transforming of standards released by other standardization organizations. Through introduction, digestion and absorption of international standards and advanced foreign standards, the level of financial standardization in China is improved, and the gap between China’s finance and its overseas competitors is narrowed.
Ⅱ.Importance and Urgency of Accelerating Financial Standardization in New Period
After more than 30 years of reform and opening-up, the financial industry in China has made significant achievements. Financial organization system, financial market system and financial regulation and supervision system are established to conform to the socialist market economy system, and they have played core roles in the modern economy. The scale of banks, securities and insurance gets a sharp increase, and the overall strength of finance continues to grow. By the end of 2010, the total assets of China’s finance have reached RMB 100 trillion yuan. The Industrial and Commercial Bank of China Limited (ICBC) ranked the first among 1 000 big banks worldwide in respect of market values. The development speed of the bond market ranked the first in the world, and the overall scale ranked the sixth in the world and second in Asia. The first financing scale of China’s securities market in 2010 ranked the first, and profit from insurance premiums ranked the sixth in the world. These data show that the influence and competition of China’s finance is improving in the international financing market.
However, we should also remember that China is not a big financial power in respect to financial quality and efficiency, and China is still facing many challenges in finance development. Mainly in these aspects, banks, securities and insurance cannot develop in enough coordination. The capital market and insurance market develop backwards, direct financing is comparatively small, insurance coverage is not sufficient, and financial efficiency and international competitiveness are to be improved. In addition, the financial industry has many shortages, including rough development patterns, insufficient innovation, unitary service variety and product homogenization. Sustainable profitability should be improved. There are some potential risks in the finance industry. Especially in financial standardization, there is a big gap between China and the rest of the world. Some agencies do not understand the importance of standardization, and they have not realized that financial standards have become fundamental strategic resources for financial development. They have not realized that financial standards are a key for international finance competition, they have not properly implemented standards, and they have not established an implementation mechanism for applicable standards. The standard structure is not reasonable, the standards get older or lost, and these standards cannot meet requirements for financial reform and development. Information isolation of departments still exists, which causes low information quality, sharing difficulties, and increased operation costs. The existing system cannot completely meet market requirements. A standard system of voluntary standards has not been formed. These departments mainly rely on the government or are authorized by the government to attend compiling and examination. Enterprises do not have sufficient initiative in participating in standardization. A mechanism with an organic combination of policies, regulations, standard development and qualification evaluation procedure has not been established. Standardization construction is backwards, and international participation is sparse.
All in all, China has much to do for the reform and opening-up in the finance industry. We must improve quality and efficiency in China’s finance industry, and fully aware the importance and urgency of strengthening financial standardization for improving the efficiency of financial markets, enhancing the international competitiveness of the financial sector, and maintaining financial stability. Firstly, financial standardization has the function to drive product innovation and update the industry structure. This is an important measure to promote standardized service management in the financial industry, improve patterns of service management and service quality, and enhance competitiveness. Secondly, financial standardization is an important method to prevent financial risks and raise financial efficiency. The development of relevant standards can promote perfection of finance supervising systems, financial stability systems and behavior standards for financial service. Moreover, the establishment of unified industrial standards is helpful to identify financial risk boundaries and prevent accidents from occurring. Thirdly, strengthening financial standardization has become necessary to handling international competition. Standards competition has become a key point of each country’s strategy in international competition environment. Advanced countries, including the US and Japan, have strengthened strategic research of standardization, and standardization has become the main content of their industrial policies. At present, the financial industry of China gradually integrates into the international financial market competition environment. Accelerating financial standardization has become the first factor for improving international competition in the finance industry. Therefore, we should further raise the awareness of our responsibility and mission to do well financial standardization, put financial standardization in prominent position, and effectively push forward relevant works.
III. Main Ideas on Financial Standardization during the 12th Five-Year Plan Period
Although there are many factors limiting the financial standardization of China, China faces many good development opportunities. The country has attached great importance to standardization, strengthened the direction of standardization and support, and issued a series of policies and measures promoting standardization reform and development. Relevant leaders have made many important instructions on standardization to create a good financial standardization policy environment. The fast development of China’s economy, finance and formationization, and gradual integration with the international finance system has provided a good market environment for financial standardization. During the 12th Five-Year Plan Period, under the leadership of the CPC Central Committee and the State Council, the PBC followed the standardization strategy of China, centered closely on financial development, took the financial standardization as a top priority of financial informationization, and positively implemented a financial standardization strategy to ensure that there are standards to abide by. Focus on doing the following work.
Firstly, we will strengthen planning and coordination. The PBC will cooperate with financial regulation agencies and related finance agencies to strengthen planning and coordination of financial standardization, specify the purpose and principle of financial standardization, and gradually establish scientific standard systems. Through implementation of financial standards, we will realize information sharing, strengthen industrial management, and improve the efficiency of finance.
Secondly，we will speed up the development and release of important financial standards. Under the standards system frame, the PBC will coordinate with each financial supervising agency and organ and organize the CFSTC to develop and
release standards in various fields by planned, step by step, and purpose, including general and foundational standards in the finance industry, banking, securities, insurance, and printing, for example, development of fundamental data standards in the financial industry, research on general message regulations in the financial industry, development of corresponding standards, establishment of the PBC System Interconnected Message Library, leading interface standardization, and message processing standardization with message standardization. Another example is the acceleration standards establishment for financial statistics, electronic payment and mobile payment, and the development of security related financial standards,etc.
Thirdly, we will strengthen implementation of financial standards. The PBC will strengthen publicity and training toward financial agencies and related enterprises. The PBC will also establish a system of financial standards to raise the awareness of financial standardization. We will strengthen theoretical research, practice, and verification on financial standards. With important standards as a link, we will guide and support the implementation of finance standards in important fields. We will explore and establish a development pattern containing complementation through advantages with system construction as source and with large-scale financial institutions as leading part and core. Supervision and inspection of financial standards implementation will be strengthened, to push forward the financial standardization development with institutions as the main body. We will also gradually establish examination and evaluation mechanism, to strength the examination and evaluation in implementation of financial standards and form a good environment for application of financial standards.
Fourthly, we will strengthen the market operation of financial standardization. Financial standardization of China is mainly government-oriented. All market mechanisms are not perfect, and implementation of financial standards is insufficient. To establish a market mechanism on finance standardization, we must first require finance managing departments to make functional transformation, namely, from the original government-oriented to the guidance by the government. The second is to raise the enthusiasm of enterprises and consumers participating in financial standardization, play the financial standardization research mechanism, so as to strengthen the market adaptability of China’s financial standardization.
Fifthly, in order to meet the needs of financial reform and development, we will highlight training of financial standardization personnel, and establish a team of standardization experts. The PBC will cooperate with related financial agencies to promote education and training of financial standardization teams, create an atmosphere in favor of financial standardization, and establish an expert team of finance standardization to play consulting functions. We will reinforce training of senior talent team and experts with a good financial knowledge, familiar with international rules, and positively participation in development and revision of international financial standards.
Sixthly, We will further strengthen international exchange and cooperation to improve the level of China’s substantially participation in international financial standardization. We will fully play the CFSTC as a platform and window, do well information introduction and dissemination internally, make a bridge and link between domestic and foreign, promote jointing between domestic financial standards and international financial standards, and promote financial standards established in China. We will gradually increase participation in international financial standards development both in range and depth, strengthen tracking and adoption of international financial standards and advanced foreign financial standards, and make careful preparation of international conferences, including the annual conference of Financial Service Technical Committee of International Standardization Organization (ISO/TC68) in 2013.