China's central bank yesterday issued new guidelines to improve corporate governance at joint equity commercial banks.
Moody's Investors Service vice-president Wei Yen said: 'The guidelines basically distil the three laws out there: the People's Bank of China law, commercial banking law and corporate law. And basically [encourage banks to] adopt a corporation-type of structure.'
The guidelines clearly define the roles and responsibilities of bank shareholders, boards of directors and outside supervisory committees. Many of them have already been adopted by corporations.
The People's Bank also issued separate guidelines for establishing independent boards of directors and outside supervisory systems to protect shareholders, especially minority shareholders.
The guidelines cover only China's 10 joint equity commercial banks, whose equity ownership is split between the state and other investors. Four of the 10 joint equity commercial banks - China Merchants Bank, China Minsheng Bank, Shanghai Pudong Development Bank and Shenzhen Development Bank - are domestically listed and already subject to the China Securities Regulatory Commission's corporate governance guidelines for listed companies.
'There's a movement to broaden the corporate governance concept which involves more and more banks. In due time, I believe these guidelines should be applied to the four largest banks as well,' Mr Wei said.
