CBIRC Plans to Curb Borrowing by Key Shareholders in Chinese Banks with New Corporate Governance Rules

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The China Banking and Insurance Regulatory Commission (CBIRC) hopes to curb the misuse of banking sector financial institutions by key shareholders with the release of new corporate governance rules.

On 29 January CBIRC issued the draft version of the “Banking and Insurance Institution Corporate Governance Standards” (银行保险机构公司治理准则(征求意见稿)) for the solicitation of opinions from the public.

The draft requires that commercial banks contain provisions in their articles of association that prohibit shareholders – and key shareholders in particular, from exercising their voting rights at general assemblies or for the nomination of directors whenever their credit is overdue at that particular bank.

The draft also requires that key shareholders make long-term capital adequacy commitments in writing to banking and insurance sector institutions, to serve as part of the capital plans for such institutions, as well as a key factor consideration during the drafting of prudential profit allocation plans.

The draft highlights the importance of shareholders bearing their legally stipulated duties as holds of equity of banking and insurance sector institutions, and requires that “shareholders cooperate with investigations and risk disposals undertaken by regulatory authorities in the case of risk incidents or major conduct in breach of regulations.”

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