CBRC Cracks Down on Malfeasance by Stakeholders in Chinese Commercial Banks


The China Banking Regulatory Commission is cracking down on illegal activity by shareholders in the country’s commercial banks with the introduction of new rules for bolstering corporate governance, as well as strengthening information disclosures and shareholder scrutiny.

On 5 January 2018 CBRC released its “Provisional Measures on the Administration of Commercial Bank Equity” (商业银行股权管理暂行办法), in the wake of recent scandals involving malfeasance by the key shareholders in Chinese commercial banks.

The new Measures will strengthen comprehensive inspections of the qualifications of bank shareholders, as well as intensify penalties for illicit or non-compliant conduct.

The Measures also clarify the definition of “key shareholder,” specify that the board chairman is the highest authority for the handling of equity matters, as well as stipulate that commercial banks should establish an equity trust system (股权托管制度) to perform centralised management of bank equity.

CBRC will now require that key shareholders inform both commercial banks and regulatory authorities of their equity structures, actual controllers and final beneficiaries, as well as affiliate relationships with other shareholders or relationships with shareholders who engage “unanimous action.”

The regulator may also restrict the shareholders rights of those shareholders who are found to have made false disclosures or failed to make disclosures, including voting and nomination rights, or the right to convene shareholders meetings.

The new Measures further require that CBRC and its subordinate agencies establish a commercial bank equity management and shareholder demerit database, to facilitate the sharing of information with other government departments and agencies via the National Credit Information Sharing Platform (全国信用信息共享平台).

The release of the new measures arrive in the wake of various scandals involving the key shareholders in Chinese commercial banks.

In an official statement CBRC pointed to the existence of “problems including the illicit and unapproved holding of bank equity, sources of funds for equity investment failing to satisfy the requirement that funds be self-owned; illicit proxy holdings, unclear equity structures, illicit undertaking of affiliate transactions in order to transfer interests, as well as abuse of shareholder rights that harms the interests of banks.”

Regulators reportedly hope to avoid a repeat of the Delong Group scandal, which saw the Xinjiang-based conglomerate acquire a total of 177 subsidiary companies and 19 financial institutions via proxy shareholding and other methods prior to its collapse in April 2004.

Zeng Gang, chair of the National Institution for Finance & Development, said to 21st Century Business Herald that strengthening of the enforcement capability of banking regulators will shore up their ability to punish illegal conduct by shareholders,

“Corporate governance determines the fundamental framework and rights allocation for banking operations, and is an entry-point for risk,” said Zeng.

“By means of systematised arrangements, we create basic conditions for improving the corporate governance of banks and expediting their long-term stable operation.