CBIRC Issues New Regulations on the Conduct of Major Shareholders in Banks and Insurers

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The China Banking and Insurance Regulatory Commission (CBIRC) has released a new set of rules governing major shareholders in the country’s banking and insurance sector financial institutions, in order to address a spate of abuses in the sector.

On 14 October CBIRC issued the “Banking and Insurance Institution Major Shareholder Conduct Administrative Measures (Trial)” (银行保险机构大股东行为监管办法(试行)).

According to CBIRC the Measures seek to “further standardise major shareholder conduct and strengthen responsibility and duty with regard to shareholding conduct, governance conduct and transaction conduct.”

The Chinese central bank’s official news publication highlighted recent abuses by major shareholders in financial institutions prior to the release of the Measures.

“In recent years, major shareholders in a small number of banking and insurance institutions have abused their shareholders’ rights, inappropriately interfered in corporate operations, illicitly obtained controlling rights, and used affiliate transactions to transfer interests and shift assets, severely harming the lawful rights and interests of small shareholders and financial consumers.”

The Measures clarify standards for “major shareholders,” setting the two grades of 15% and 10% of equity in banking and insurance institutions.

They also further clarify the responsibilities of major shareholders with regard to allocation risk disposal, information submissions, capital supplementation and shareholder rights negotiations.

Zhou Maohua (周茂华), financial markets macro-researcher with Everbright Bank, said to state-owned media that the Measures will “expedite accelerated improvements to corporate governance, standardise business conduct and thus effectively prevent financial risk by strengthening the regulation of shareholders and their conduct.”

Dong Ximiao (董希淼), chief researcher with Merchants Securities, said that Chinese commercial banks currently suffer from inadequacies in terms of corporate governance – an issue which is especially pronounced amongst small and medium-sized lenders.

“Equity structures are in need of optimisation, and shareholder regulation isn’t standardised,” said Dong. “Against this background, the Measures will place standardised restraints on the conduct of major shareholders, drive the standardised exercise of rights by major shareholders, and maintain the stable operation of banks and insurance institutions.”

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