CBIRC Flags Heavy Pressure on Affiliate Transactions and Shareholder Irregularities of Banks and Insurers


China’s top banking regulator says it will take steps to “normalise” heavy regulatory pressure on domestic financial institutions when it comes to dubious shareholding and affiliate transaction practices.

On 28 April the China Banking and Insurance Regulatory Commission (CBIRC) announced that it would push for the “normalisation of specialist rectification work” when it came to scrutiny of the shareholder relations and affiliate transactions of banks and insurers.

This will include “strengthen disposal and penalty [measures],” as well as the formulation of a slew of key corporate governance systems including:

  • Banking and insurance corporate governance standards,
  • Regulatory guidance for major shareholders,
  • Administrative measures for affiliate transactions,
  • Measures for the assessment of the performance of directors and supervisors.

CBIRC also flagged the establishment of an affiliate transaction supervisory and regulatory system, and a “front-end risk prevention interface.”

“In recent year CBIRC has continually undertaken specialist rectification of the shareholders and affiliate transactions of banking and insurance entities, in order to effectively restrain he development of malfeasance,” said a CBIRC official.

“In 2019 the focus was on small and medium-sized organisations, with the comprehensive inspection of outstanding problems and risk, and strict crackdowns on illegal and illicit conduct including false capital contributions, proxy equity shareholding, and shareholders interfering in or illicitly channeling profits in breach of regulations.”

CBIRC highlighted the successes of specialist campaigns in 2020 which scrutinised over 4,600 banks and insurers, focusing in particular on “capital that isn’t real and shareholders that aren’t real,” as well as the misappropriation of funds.

“Over the past two years [we] have applied penalties of 140 million yuan in total and penalised 395 individuals, as well as comprehensively adopted methods including restrictions on market entry, merger and structuring, introduction of strategy investors, equity transfer orders, and restrictions on shareholders rights.

“The past two years have seen the clearance and withdrawal of over 2,600 illegal and illicit shareholders.”