MNI BRIEF:PBOC Pan Calls For World Financial Governance Reform

Global financial governance should be strengthened by diversifying monetary and cross-border payment systems, enhancing regulatory coordination, and increasing emerging markets’ representation in major international financial institutions, People’s Bank of China Governor Pan Gongsheng wrote in Qiushi magazine on Tuesday.

The international monetary system may evolve into a structure where several sovereign currencies coexist, compete and counterbalance, Pan said. He noted reform discussions are intensifying, often driven by geopolitical considerations, while Special Drawing Rights (SDRs) still lack sufficient consensus to serve as the dominant global currency. (See MNI: PBOC To Continue Gold Buying As Dollar Hedge)

Pan suggested expanding the regular issuance of SDRs, with greater private sector participation to encourage their use in trade and investment. SDR-denominated bonds could help strengthen their role as a reserve asset, alongside developing a settlement mechanism suitable for large-scale use.

The implementation of international regulatory frameworks such as Basel III has been shaped by domestic political factors in member states, creating risks of regulatory arbitrage, he added. Stronger oversight is also needed in emerging areas such as digital finance and non-bank intermediaries, he said. The IMF’s quota structure, meanwhile, fails to adequately reflect member countries’ weight in the global economy, Pan argued.