CBIRC issued draft guidelines for banks and insurers to improve quality and efficiency of corporate governance. The guidelines specify that good corporate governance involves clear equity structure, sound organizational structure, clear boundaries of duties and high standards of professional ethics, effective risk management and internal controls, sound information disclosure mechanism, reasonable incentive and restraint mechanism, good stakeholder protection mechanism, and strong sense of social responsibility. The guidelines have been set out in response to the advocacy requirements of the G20/OECD Corporate Governance Principles. The comment period for the draft guidelines is open until March 01, 2021.
The supplementary provisions of the guideline explain that commercial banks, insurance companies, and bancassurance institutions, as mentioned in these "standards" refer to large state-owned commercial banks in the form of joint stock limited companies, national joint-stock commercial banks, urban commercial banks, private banks, rural commercial banks, foreign banks, insurance group (holding) companies, property insurance companies, reinsurance companies, and life insurance companies. On issuance of the final corporate governance guidelines, the Guidelines on Corporate Governance of Commercial Banks and the Guiding Opinions on Regulating the Governance Structure of Insurance Companies (for Trial Implementation) shall be repealed. The draft guidelines on corporate governance stipulate some of the following key requirements for banking and insurance institutions:
- The shareholders, directors, supervisors, and senior management personnel of these institutions shall abide by laws and regulations, regulatory provisions, and the company’s articles of association and perform their duties in accordance with their respective responsibilities, coordinate operations, and effective checks and balances.
- Banking and insurance institutions shall, in accordance with regulatory provisions, establish a comprehensive risk management system that covers all business processes and operational links and matches the risk status of the company.
- Institutions shall mandate in the company's articles of association that major shareholders need to make a written long-term commitment to the institution for capital supplementation as part of the institution's capital planning; the company's articles of association shall stipulate that the company needs to formulate a prudent profit distribution plan.
- Banking and insurance institutions shall disclose important company information, including financial status, major risk information, and corporate governance information, in accordance with relevant regulatory provisions. The information disclosed by a bancassurance institution shall be true, accurate, complete, timely, concise and clear, and easy to understand. There shall be no false records, misleading statements or major omissions.
- Regulatory agencies shall regularly conduct on-site or off-site evaluations on the corporate governance of the covered institutions. On communication of the regulator feedback on the results of the corporate governance regulatory assessment, the institution shall promptly report the relevant situation to the board of directors, the board of supervisors, and senior management and make timely corrections in accordance with the regulatory requirements.
Related Links (in Chinese)
Comment Due Date: March 01, 2021
Keywords: Asia Pacific, China, Banking, Insurance, Governance, Disclosure, Internal Control, Disclosures, Operational Risk, CBIRC
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