China will merge the China Banking Regulatory Commission and the China Insurance Regulatory Commission to form a new organization that will more efficiently manage the two sectors, under a draft plan for State institutional reform released on Tuesday.

Led by the State Council, China's Cabinet, the new commission is designed to ensure the stable development of the two sectors while helping to prevent risks to the overall financial system.

The body is also expected to better protect the rights of financial consumers, according to the draft plan submitted during the ongoing 13th National People's Congress.

Functions and duties, including the drafting of key regulations and supervision of the basic financial system, will belong to People's Bank of China, the central bank, under the plan.

The reform is designed to solve problems such as overlapping duties and loopholes in regulatory functions, and to further clarify the responsibilities of supervisors.

Combining the two commissions will enhance comprehensive financial supervision functions, as well as improve the quality and efficiency of regulation, said Xu Zhong, head of the central bank's research bureau.

The move will also strengthen the bank's administrative function when it comes to macro prudential regulation, which is a key to forestalling and defusing major risks - one of the "three critical battles" to win by 2020, Xu said.

Ma Jun, director of Tsinghua University's Finance and Development Research Center, said the financial regulatory framework created by the reform is expected to better coordinate monetary policy and macro prudential financial regulations, avoiding redundant management responsibilities.

The banking regulatory commission, established in 2003 and currently chaired by Guo Shuqing, oversees more than 4,000 banks with about $40 trillion in assets.

The insurance commission was created in 1998. Its top leadership position remains vacant following last year's launch of an investigation into Xiang Junbo, the former chairman, who is suspected of taking bribes.