China will merge the China Banking Regulatory Commission and the China Insurance Regulatory Commission, forming a new organization to better regulate the country's banking and insurance sectors, according to a draft plan for State institutional reform released Tuesday.

Directly led by the State Council, China's cabinet, the new commission is supposed to oversee the banking and insurance industries, ensuring legitimate and stable development of the two sectors and preventing systemic financial risks.

It is also expected to better protect the legal rights of financial consumers, according to the draft plan submitted to the first session of the 13th National People's Congress.

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

The reform is designed to solve existing problems such as duty overlapping and loopholes in regulatory functions, and to further clarify responsibilities between different supervisors, the draft plan read.