China's central bank has set up an institution to improve financial regulation and risk prevention, the office of public sectors reform commission said in a statement Saturday.

According to the statement, The People's Bank of China (PBOC) has established a macro-prudential management bureau to replace the previous foreign exchange department.

The bureau will be responsible to formulate macro-prudential policies, assess financial agencies, draft rules and regulations, and monitor financial risks.

It will also shoulder foreign exchange department duties, such as assessing foreign exchange policies and promoting the yuan's cross-border transactions.

Establishing the bureau is a crucial measure in the country's strategy of building a two-pillar framework consisting of monetary policy and macro-prudential assessment, said Yin Zhentao, a researcher with the Chinese Academy of Social Sciences.