China's financial supervision has made significant progress, but more efforts are needed to meet challenges ahead, the International Monetary Fund (IMF) said on Thursday.

"Regulation and supervision of China's banking system has made impressive progress in the past few years, led by an activist, forward-looking regulator China Banking Regulatory Commission (CBRC), with a clear safety and soundness mandate," the IMF said in its detailed assessment report released on Thursday about China's banking system.

However, the Washington-based global financial institution cautioned that as further opening up, innovation and expansion of banks occur, complexity and risks will increase at the same time.

The document is one of the five detailed assessment reports about China's observance with international financial standards, which were prepared under the IMF's Financial Sector Assessment Program (FSAP).

In a separate detailed assessment report about China's insurance companies, the IMF said insurance companies in China were closely supervised and generally subjected to appropriate regulation.

As for the securities and futures industry regulation, the IMF noted that Chinese securities and futures sector and their regulation have undergone considerable development. Reforms in recent years, including the non-tradable shares reforms, the introduction of stock index futures trading in 2010, have enhanced the transparency of the market and broadened the range of available products.

China is one of the 25 "systemically important" economies that have agreed to mandatory financial sector assessment at least once every five years. The FSAP is a key part of the IMF's activities in financial surveillance and the monitoring of the international monetary and financial system.

Other systemically important economies subject to FSAP assessment include Brazil, Britain, France, Germany, Italy, Japan, Russia and the United States.