Actions should be taken in time to dispose financial institutions in "severe trouble" and insolvent ones should go bankrupt if they deserve, said Wu Xiaoling, Vice Governor of People's Bank of China, at a China-Japan economic forum in Beijing on July 3.

She said that China and Japan share some experience in preventing financial risks. First, financial institutions in serious trouble should be treated early. Otherwise, aggravated problems will wobble the whole financial sector. But we have not taken early actions to see to this issue due to some worries.

Secondly, mired financial institutions should be urged to make improvement, especially on disposal of non-performing assets. In this way, less financial institutions will face breakdown.

Thirdly, Wu argued, depositors and investors should only enjoy "limited protection". Under "indefinite" protection, they do not care about the operation of the institutions or risks of financial products.

And fourthly, a perfect legal system should be there. Wu highlighted the following points for this aspect: defining legal relationship of main financial services, limited protection regime for depositors, investors and the insured, offering a legal base for insolvency of financial sector, and a real-time correcting mechanism for operation of financial institutions.

She also stressed that persons, especially the management, should be held responsible for their bad performance and breach against rules, which causes bankruptcy of a financial institution.

She noted that financial institutions, like any other businesses, would be subject to Corporate Bankruptcy Law which are being revised.

By People's Daily Online