SCIO briefing on reform and development of China's banking and insurance sectors in 2020
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E-mail China.org.cn, January 25, 2021
CCTV:
I'd like to ask a question about corporate governance. Last year, CBIRC disclosed lists of non-compliant shareholders and intensified supervision work for corporate governance over the last two years. After the disclosure of lists, has there been any follow-up? What measures were taken last year and what new measures will be taken for this year's work? Thank you.
Liang Tao:
Thank you for your questions, I will answer them. Just like you said, CBIRC attaches great importance to the supervision work and governance reform of banking and insurance institutions and sees the enhancement of corporate governance as a means to improve banking and insurance institutions' abilities to withstand risks and achieve high-quality development. Our work mainly relates to four aspects as follows:
First, we enhanced the top-level design. Last year, we released the Three Year Action Plan for Improving Corporate Governance of Banking and Insurance Sectors (2020-2022), which outlines the roadmap and timetable for supervision work and reform for corporate governance in the banking and insurance sectors over the next three years.
Second, we strengthened points of weakness in the system. We stepped up the building of the corporate governance regulation system and set up rules for companies in the banking and insurance sectors to obey. These were targeted at addressing major issues such as behaviors of large shareholders, connected transactions, deductions from salary, evaluation of the performance of corporate directors and supervisors, and poor records on equity management. For key issues, we are ready to formulate special regulatory regulations.
Third, we carried out regulation and assessment. We have completed our assessment on corporate governance of all commercial banks and insurance institutions for the first time. We evaluated the governance of 1,792 institutions. Generally speaking, most institutions were rated B (good) and C (regular). The number of companies rated B and C stands at 1,400, accounting for 78.12% of the total. A total of 209 institutions were rated D (bad) and 182 institutions were rated E (very bad), accounting for 11.66% and 10.16%, respectively. Through the evaluation, regulators were able to grasp a comprehensive understanding of the corporate governance system in banking and insurance sectors in a timely manner. By conducting rectification and supervision work based on these assessments, regulators will push companies in the banking and insurance sectors to enhance the quality and efficiency of corporate governance.
Fourth, we conducted specific rectifications. Focusing on small and medium-sized institutions, we sternly dealt with activities that violated laws and rules, such as fraudulent capital, share-holding entrustment, shareholders' direct interference in company operations, and benefits transfer through improperly connected transactions. We inspected 4,600 legal entities, handled over 3,000 equity violations, and in two batches, disclosed to the public a list of shareholders of 47 banks and insurance institutions who severely violated laws and rules and led to serious social impacts. We also appropriately cracked down on equities of illegal shareholders in high-risk institutions and removed them in an orderly way.
In general, through the continuous efforts made by the financial regulators and the industry over the past year, China's banks and insurance institutions have achieved positive outcomes in corporate governance and reform. However, several existing problems should be brought to the forefront. First, the Party building in some state-owned institutions has become weakened and they failed to realize the integration of the Party's leadership with corporate governance. Second, some institutions were found to have prominent problems, including a lack of transparency in ownership structures, share-holding entrustment, prevalence of dormant shareholders, and shareholders overstepping their bounds with misconducts. Some big shareholders directly interfered with an institution's operations and pulled strings to control the board of directors and top executives to realize benefit transfer through illegal connected transactions thus misappropriating the institution's interest at will. Third, the boards of directors in some institutions operated irregularly; some non-executive directors could not, dared not, or were unwilling to perform their duties, and the independence and professionalism of some directors could not be guaranteed at all. Fourth, information disclosure was not standardized, and the rights and interests of stakeholders, including financial consumers, could not be adequately protected.
In 2021, the CBIRC will thoroughly implement the spirit of the Central Economic Work Conference, continuously promote banks and insurance institutions to enhance their corporate governance, uphold and strengthen the Party's overall leadership relating to financial work, promote the integration of the Party's leadership with corporate governance in state-owned banks and insurance institutions, improve with speed the supervision system in corporate governance, and step up efforts to issue regulatory rules on corporate governance, big shareholder conduct, connected transactions, remuneration deductions, and director and supervisor performance evaluations. We will also improve commercial bank equity custody mechanisms, step up medium- and long-term classified punishment system for shareholders, take measures like "blacklisting," restricting stockholders' rights, and exposing and cracking down on illegal stockholders. We will carry out corporate governance supervision assessments, strengthen classified supervision, and intensify market discipline. In addition, we will also improve the corporate governance regulatory information system to enhance the informatization level of our supervision. Thank you.
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