CHINA will encourage financial innovation and will control potential risks arising from the process, Wang Zhaoxing, vice chairman of the China Banking Regulatory Commission, told a forum in Beijing Friday.

    “In the context of putting more emphasis on defense against financial risks, we should continue to vigorously promote financial innovation,” Wang said, according to a transcript of the speech.

    “We should ensure that risks from innovation for financial institutions are under control.”

    Measures to control risks could include higher provisions and capital requirements for financial institutions, he said.

    China’s financial innovation in recent years has supported the real economy and boosted banks’ competitiveness, but “there have been a lot of financial risks and chaos that could bring about an impact and even threat to the safety and stability of the banking system,” he said.

    China’s financial innovation, including capital market tools, securitization and Internet finance, has led to rapid growth of shadow banking activities, he added.

    The banking regulator will strengthen its coordination and information sharing with securities and insurance regulators, as well as the central bank to help curb risks, Wang said.(SD-Agencies)