Divided between China Banking Regulatory Commission (CBRC) and the China Insurance Regulatory Commission (CIRC), regulators now oversee different parts of China's complex financial sector, and no single regulator has a complete picture of capital movements in the system.
The reform plan will be submitted to the ongoing first session of the National People's Congress (NPC) for deliberations, state-run Xinhua news agency reported.
The long-awaited measures to tighten the control over the banking and insurance sector of the country, which has a total value of 42 trillion United States dollars, comes amid the authorities' attempts to curb risky credit practices and reduce high corporate indebtedness.
China's financial system has become increasingly tough to regulate due to its sheer breadth.
The changes include the establishment of a national market management bureau.
The new body will decide on antimonopoly and pricing issues, replacing the roles played by the three national antitrust regulators: the National Development & Reform Commission (NDRC), the Ministry of Commerce and the State Administration for Industry and Commerce (SAIC).
The move is part of President Xi Jinping's plan to retool the entire administration to give the ruling Communist Party greater control and a more effective platform to govern the world's most populous nation.
On Sunday, China removed presidential term limits from its constitution, giving Xi the right to remain in office indefinitely, and confirming his status as the country's most powerful leader since Mao Zedong died more than 40 years ago.
The new plan also intends to cut bureaucracy and turf wars by removing overlapping duties and responsibilities, the Post report said.
There will also be new administrations, such as an worldwide development cooperation agency, a state immigration administration, and a banking and insurance regulatory commission. Once this happens, the Cabinet will consist of 26 Ministries and Committees.
Compared with the current setup of cabinet administrations, the number of ministerial-level entities is reduced by eight and that of vice-ministerial-level entities by seven.