The People's Bank of China unveiled a set of draft rules on Tuesday to better regulate the related-party transactions of financial holding companies as part of the central bank's efforts to strengthen financial risk prevention. To avoid improper transfer of interest, risk concentration and contagion as well as regulatory arbitrage, the PBOC has drafted the rules and will collect public opinion through Sept 30, the central bank said on Tuesday.

Financial holding companies should establish and improve rules regarding the management, reporting and disclosure of related-party transactions to strengthen their risk management and internal control, the draft rule said.

Specifically, companies should establish a management committee for related-party transactions under the board of directors, prudently set upper limits for such transactions and report information on related-party transactions to the PBOC. Financial holding companies will have a transition period of one year to align their governance with the new requirements.