People's Bank of China, Corporate Governance of Share System Commercial Banks Guidelines

Promulgated: June 4 2002
Effective: as of date of promulgation
Interpreting authority: People's Bank of China
Applicability: The Guidelines apply to share system commercial banks established in the PRC (Article 82). For the purposes of the Guidelines, "corporate governance of a commercial bank" means the establishment of an organizational framework consisting of a shareholders' general meeting, a board of directors, a board of supervisors and senior management, the arrangements to ensure independent operation and effective balance of the components of this organizational framework, and the creation of rational and effective decision making, incentive and control mechanisms (Article 2).

Main contents: The Guidelines set out the basic principles for corporate governance of commercial banks, distinguish the functions of the shareholders' general meeting, the board of directors and the board of supervisors and specify the rights and obligations of shareholders, directors, supervisors and senior management. Shareholders who hold individually or collectively 10% or more of the voting shares of a commercial bank or the board of supervisors may convene a provisional shareholders' general meeting when the board of directors is not performing its duties, causing important decisions not to be made or a shareholders' general meeting not to be held (Article 15). The board of directors shall convene regular meetings at least four times each year and shall file its decisions, resolutions and meeting minutes with the People's Bank of China (Article 34). The board of directors shall set up affiliated transaction control committees, risk management committees, salary committees and nomination committees (Article 40). The chairman of the board of supervisors shall have professional knowledge and work experience in accounting, finance, audit or law (Article 62). The board of supervisors shall retain an accounting firm acceptable to the People's Bank of China to audit the business results of the bank (Article 65). A commercial bank shall set up an incentive mechanism that links remuneration with business results and personal performance (Article 77).
Related legislation:PRC, Company Law (Amended), Oct 27 2005, CLP 2005 No.10 p21; PRC, People's Bank of China Law, Mar 18 1995, CLP 1995 No.5 p23 and PRC, Commercial Banking Law, May 10 1995, CLP 1995 No.5 p32