BEIJING — China issued fresh rules on Sept 13 to tighten regulation of the country's financial holding companies, a move that experts say will forestall risks in the financial sector.

The new regulation concerns non-financial companies and other eligible entities that control at least two financial institutions doing business across financial sectors, requiring them to apply for and gain approval from the central bank, the People's Bank of China (PBOC), to establish financial holding companies.

The move is aimed at plugging regulatory loopholes and deepening financial reforms amid efforts to maintain market order, reduce risks and enhance support for the real economy, according to a notice released by the State Council.

The new rules will be effective from Nov 1, 2020.

While some large financial groups and non-financial enterprises have been operating as financial holding firms in recent years to conduct cross-industry investments, financial holding companies have not been included as a group in the country's supervision framework, posing financial risks, PBOC Vice-Governor Pan Gongsheng told a press briefing on Sept 14.

Recognizing that some well-managed firms have optimized resources and reduced costs by means of financial holding firms, Pan also noted irregularities in the sector, including misuse of funds from financial institutions and improper profits from related-party transactions.

The new rules require non-financial firms to establish separate financial holding companies subject to regulation, effectively putting up a firewall between the real economy and the financial sector to reduce contagion risk, Pan said.

The new regulation will have a positive impact on the financial market, facilitating orderly competition among all sorts of institutions and forestalling systematic risks, the PBOC said in a statement.

China has been stepping up efforts in recent years to contain financial risks, cracking down on high-risk shadow-banking activities and taking over financial firms with illegal practices that threatened their solvency.

The country's financial regulators have been dealing with risks exposed by Tomorrow Holdings, Anbang Group and other firms with the characteristics of financial holding companies, Pan said.

The central bank will continue to roll out detailed rules governing financial holding firms and work with other regulators to enhance the ability of financial holding firms to serve the real economy, he added.