China’s Banking Corporate Governance Report Gives Zero A Grades, Highlights Lack of Party Leadership

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The China Banking and Insurance Regulatory Commission (CBIRC) has released a new assessment of corporate governance in the banking and insurance sectors that highlights problems including a lack of leadership exercised by the Chinese Communist Party (CCP).

CBIRC issued the “2021 Banking and Insurance Institution Corporate Governance Regulatory Assessment Results Report” (2021年银行保险机构公司治理监管评估结果总体情况) on 14 November.

According to CBIRC the assessments were made on the basis of the trial version of the “Banking and Insurance Institution Corporate Governance Regulatory Assessment Measures” (银行保险机构公司治理监管评估办法(试行)), covering a total of eight areas including party leadership, shareholder governance, director governance, supervisory boards and executives, internal risk control, affiliate transactions, market constraints and relations with other interested parties.

The Report assessed a total of 1857 financial institutions including 1673 commercial banks and 184 insurance institutions, and conducted on-site assessments of 745, accounting for 40.12% of the total.

A total of 1100 financial institutions received “C” ratings (satisfactory), accounting for 59.24% of the total, while 366 received “B” ratings (good), for a 19.71% share.

253 financial institutions received D ratings (weak), for a 13.62% share, while 138 were hit with E ratings (7.43%). No Chinese banks or insurers received an A rating, reserved for outstanding corporate governance.

The Report highlighted a range of corporate governance issues across the Chinese financial sector, including lack of sufficient involvement and input from their internal CCP committees, and non-compliant and imprudent conduct on the part of shareholders, such as failure to pay capital in full and proxy holding of equity in breach of regulations.

CBIRC also pointed to key shareholders interfering in the running of financial institutions in breach of regulations; failure of boards of directors to properly exercise their duties, and insufficient internal risk control systems.

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