China Banking Regulatory Commission, Guidelines on Performance of Boards of Directors of Share-system Commercial Banks with Due Diligence (Trial Implementation)

Issued: September 12 2005
Effective: as of date of issue
Interpreting authority: China Banking Regulatory Commission (CBRC)
Applicability: The Guidelines shall apply to share-system commercial banks and urban commercial banks established in China. Listed banks shall abide by the Guidelines as well as relevant provisions of the China Securities Regulatory Commission (Article 66).

Main contents: The board of directors of a share-system commercial bank shall earnestly protect the lawful rights and interests of the shareholders, as well as the benefits of the depositors and other interested parties (Article 2). The board of directors shall be completely in control of information and shall not replace the independent judgement of the board with the judgement of the shareholders or senior management (Article 3). The board of directors shall monitor the thorough implementation of the commercial bank's development strategies (Article 11). It is responsible for deliberating on the commercial bank's annual business plans and investment proposals. Important investments shall be subject to the approval of the board (Article 12). The board of directors shall bear the ultimate responsibility for the administration of the commercial bank's capital adequacy ratio. When the commercial bank's capital cannot satisfy the need of its business development or cannot meet the monitoring requirements, the board of directors shall formulate a capital replenishment plan and supervise the implementation thereof (Article 13). The board of directors shall continuously pay attention to the transactions between the commercial bank's internal personnel and affiliated shareholders. For affiliated transactions violating or possibly violating good faith or the principle of fairness, the board shall order the related persons to terminate the transaction or re-arrange the transaction conditions (Article 19). Commercial banks shall submit a report on the performance of the board of directors with due diligence to the CBRC within four months after the end of each accounting year (Article 63).
Related legislation: PRC Company Law (Amended), Oct 27 2005; PRC Banking Regulation Law, Dec 27 2004 CLP 2004 No.1 p.45 and PRC Commercial Banking Law (Revised), Dec 27 2004 CLP 2004 No.1 p.4