The Asia Global Payment Summit. Bali, Indonesia. 10-11 October 2019

Chinese Communist Party Tightens Control of Banks with Internal Committees

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The Chinese Communist Party will expand its influence over the banking sector with the official establishment of party committees at a slew of listed mid-tier and regional lenders.

According to a report from Reuters 40 of China’s listed banks have announced they will make changes to their articles of association in order to accommodate the establishment of party committees, including 26 since the start of 2018.

In many cases the party committees will be consulted prior to the formulation of corporate strategy by banks, while in-house disciplinary committees will also be established in order to monitor the conduct of party members and issue punishments where required.

Big four lender China Construction Bank has already set up a disciplinary committee, which announced in April that it would extirpate corrupt credit practices and focus on internal compliance.

The move comes amidst a crackdown on systemic financial risk by Beijing, and follows the long-standing precedent of state-run listed companies where party committees call the shots instead of boards.

“Tighter party discipline doubtless will provide added teeth to the financial crackdown, increasing personal accountability of financial managers,” said James Stent, a US-born veteran of the Chinese banking system who serves as independent director at China Minsheng Bank.

Xu Jia’ai, head of disciplinary inspection at the People’s Bank of China, said earlier this year that a lack of “strict party governance” was a key contributor to risk in the Chinese financial system.

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