CHINA BANKING REGULATORY COMMISSION 2011 Annual …zhuanti.cbrc.gov.cn/subject/subject/nianbao2011/English/Part Four... · 60 2011 CHINA BANKING REGULATORY COMMISSION Annual Report

CHINA BANKING REGULATORY COMMISSION 2011 Annual Report

Part FourImprovement of

Regulatory Framework and Supervisory

Capacity

60 2011 CHINA BANKING REGULATORY COMMISSIONAnnual Report

Development of regulatory policy framework(I) Improving legal framework

In 2011, the CBRC actively put into action the Opinions of the State Council on Strengthening the

Building of a Government Ruled by Law (Guo Fa No. 33, [2010]) and enhanced the quality of rule-making

to further standardize supervision and regulation in accordance with applicable laws and regulations.

1. Improvement of regulatory policy framework. A total of five rules and 31 regulatory documents were

formulated during the year with a view to developing a sound policy framework for regulation. Specifically,

the Regulation on Leverage Management of Commercial Banks and the Regulation on Loan Loss

Provisioning of Commercial Banks were issued to ensure the proper implementation of new international

standards for financial supervision; the Regulation on Credit Card Business of Commercial Banks and

the Regulation on the Sale of Wealth Management Products of Commercial Banks were issued to

standardize the operating practices of banking institutions; moreover, the Decisions on Amendments

to the Provisional Rules on Derivatives Transactions of Financial Institutions were amended in due

course for the purposes of facilitating prudent business development and better risk management of banking

institutions.

2. Strengthening legal work mechanisms. The 2011 legislation plan was formulated and implemented. In

addition to the holding of the first administrative review hearing, the CBRC strictly put into action the public

consultation and public disclosure policies for the regulatory system, the unified interpretation and consultation

system for rules and regulations, the filing and registration system of statutory documentation, the post

assessment system and the expert consultation and justification system.

3. Standardizing regulatory decision-making and enforcement. Decisions were made in accordance with the

laws and regulations as well as the stipulated procedures, and the principle of democratic centralism was

applied thoroughly to significant regulatory decisions. All necessary procedures were strictly followed. In line

with the principle of “Equality before the law”, the CBRC strictly enforced appropriate laws and regulations

and took actions against non-compliant practices. Also, it adhered to the combination of principles-based

and rules-based supervisions in making supervisory discretions. Both guidance and mandatory enforcement

were adopted in supervision. In accordance with its statutory responsibility, the CBRC also took initiatives

to address the issues of greatest concern to the market and consumers, improve effectively the delivery of

banking services and safeguard the rights and interests of consumers, and thereby help foster a safe and

sound financial market.

61

CHINA BANKING REGULATORY COMMISSION

Box 13: Improving supervisory standards for commercial banks

In 2011, in line with the principle of tailoring overseas experiences to China’s real situations and the latest achievements

of the international financial regulatory reform, and taking full account of the realities of China’s banking sector,

the CBRC formulated and revised a set of supervisory standards with respect to capital management, liquidity risk

management, corporate governance, assessment and supervision of systemically important commercial banks.

The Regulation on Leverage Management of Commercial Banks promulgated by the CBRC sets forth clear-cut

fundamental principles for leverage ratio supervision and measurement methodologies. The Regulation also prescribes

that leverage ratios on both consolidated and standalone basis shall neither be lower than 4%, and allows corresponding

transitional arrangements. In addition, the Regulation specifies corrective measures that can be imposed on commercial

banks when leverage ratios falling below the minimum regulatory requirement.

The Regulation on Loan Loss Provisioning of Commercial Banks adopted by the CBRC sets forth clear-cut

fundamental principles and requirements for the supervision of loan loss provisions. The Regulation also sets the

minimum benchmark of loan provisioning ratio and provisioning coverage ratio at 2.5% and 150% respectively, the

higher of which shall prevail as the minimum requirement. In addition, the Regulation specifies corresponding transitional

arrangements and stipulates supervisory actions that can be taken on the commercial banks with loan provision ratios

below the minimum standard.

The Regulation on Capital Management of Commercial Banks drafted by the CBRC completed the process of

soliciting public opinions in 2011. The Regulation prescribes a series of supervisory requirements on capital, including,

among others, the measurement of capital adequacy ratio, capital definition, measurement of weighted assets for credit

risks, market risks, and operational risks and information disclosure.

The Regulation on Liquidity Risk Management of Commercial Banks (Provisional) drafted by the CBRC also

completed the public consultation process. The Regulation prescribes fundamental elements of commercial banks’

liquidity risk management system and corresponding supervisory requirements, puts forward liquidity coverage ratio

and net stable funding ratio as supervisory criteria, and helps improve the supervisory indicators system and monitoring

& analytic framework pertaining to liquidity risks. Further, it prescribes supervisory methodologies and approaches for

assessing the profiles and effectiveness of commercial banks’ liquidity risk management.

(II) Participating in national legislation

In 2011, the CBRC participated in drafting or amending a number of laws and regulations, including, among

others, the Amendment to the Law on Securities Investment Funds, the Law of the People’s Republic

of China on Individual Income Tax (Draft), the Amendment to the Military Service Law of the People’s

Republic of China (Draft), the Amendments to the Criminal Procedure Law of the People’s Republic of

China (Draft), the Amendments to the Civil Procedure Law of the People’s Republic of China (Draft),

the Rules on Penalties for Non-compliance of the Management and Use of Social Security Funds

(Draft for Review), the Amendments to Regulations on Patent Commissioning (Draft for Review),

the Amendments to the Law of the People’s Republic of China on Resident Identity Cards (Draft),

the Regulations for the Management of Foundations (Draft Amendment for Review), the Draft

Amendments to the Standardization Law of the People’s Republic of China (Draft for Review) and

the Law of the People’s Republic of China on Asset valuation (Draft).


Supervisory approaches(I) Licensing

1. In licensing new establishments, while sticking to risk-based process and procedures, the CBRC made a

particular effort to guide banking institutions to better serve the needs of the real economy. Firstly, in the

principle of differentiated treatment aligned with banks soundness, the banking institutions with good risk

profiles and sound management practices were supported in the first place, while any reckless development

of banking institutions under poor risk management would be restricted. Secondly, banking institutions

were encouraged to establish branches and sub-branches according to the state development strategies and

industrial policies so as to support key sectors of strategic and emerging industries. The CBRC also supported

enterprises that were aligned with industrial policy orientation to set up non-bank financial institutions, such

as finance companies and auto financing companies. Thirdly, the CBRC guided banking institutions to give

more support to under-banked areas, encouraged them to establish special business units (such as Small

Business Credit Center) to provide financial services in support of small and micro enterprises as well as agro-

related undertakings. In establishing branches and sub-branches, banking institutions were directed to be

centering on central and western regions, unbanked places and small and micro businesses. In addition, the

withdrawal of outlets in rural areas by small- and medium-sized financial institutions were strictly controlled,

and the establishment of new-type rural financial institutions in western China and underdeveloped counties

in central China were actively encouraged.

2. In licensing new businesses, while sticking to prudential principles, the CBRC attached importance to

the transformation of banking institutions. Firstly, the CBRC took into account banking institutions’ risk

bearing capacity, the substitutability of new business for the old ones, and the strength to back up banking

infrastructures. Banking institutions were also required to improve their ability to identify and assess risks

associated with new businesses or products and avoid reckless innovations. Secondly, the CBRC guided

banking institutions to optimize their asset structure, increase the share of non-credit business, and enlarge

their retail business, fee-based business, small and micro enterprise business and capital-saving business, so

as to achieve a more balanced business development. Thirdly, it guided banking institutions to deepen market

segmentation and explore the niche markets where they could be competitive in building featured products

and brand images. Fourthly, the CBRC required banking institutions to strictly control the fees and procedures

in providing financial service with a view to safeguarding depositors and consumers’ rights and interests and

improving their sense of satisfaction.

3. The nurturing of prudent culture was aligned with the fit and proper test for senior executives and

shareholders. The CBRC urged board directors and senior executives of banking institutions to set an

example in the aspects of conducting prudential operation, abiding by laws and regulations, and performing

honesty, integrity and diligence so as to facilitate the nurturing of a culture featured by rational growth,

refined management and compliance. Stringent measures were adopted to avoid imprudent behaviors of

shareholders, e.g., requiring major shareholders of city commercial banks to make a written statement to

ensure not seeking related party transactions that prevail over other shareholders, not interfering with the

bank’s routine operations, not imposing any inappropriate targets, a lock-up period of no less than five years

for their equity investment and replenish capital on an on-going basis.

4. Workflow was optimized and efficiency boosted. Through combining prudence with efficiency, the

63


CBRC firstly further clarified the key points and required documents of licensing process to ensure clear-cut

responsibilities and smooth procedures; and secondly, streamlined procedures in a number of areas. For

example, with regard to large commercial banks, the CBRC launched unified qualification examination for their

senior executives, required banks to submit an overall plan of institutional setup, and integrated applications

of various new businesses or products into one for review and approval; it also adopted the practice of “one

application for tiered approvals”, thus reducing the time of application processing.

In 2011, the CBRC and its local offices processed a total of 68,049 pieces of applications, of which 30,956

were related to establishment, changes and termination of institutions; 9,378 related to new businesses, and

28,089 related to qualification of board directors and senior executives.

(II) Off-site surveillance

1. The CBRC increased the effectiveness of routine off-site surveillance through the following methods.

Firstly, country risk was placed under the radar screen of monitoring. 14 banking institutions, including

China Development Bank, were required to submit country risk returns, by which the CBRC could monitor

the banks’ direct risk exposures, risk transfer and part of the off-balance-sheet exposures in 209 countries

and jurisdictions. Secondly, the CBRC strengthened consolidated supervision on large commercial banks

in respect of conducting oversight comprehensively, assessing the risk of the group and evaluating the

capability of consolidated management. The Guidelines on Consolidated Supervision of Banking Asset

Management Companies (Provisional) was issued for the purpose of strengthening the supervision on

diversified operations and group risk controls of the banking asset management companies. Thirdly, in addition

to the data from off-site surveillance returns and schedules, the CBRC obtained a full range of information

by other means, such as having staff present at various bank meetings and referring to media coverage.

Fourthly, off-site supervisory indicators that reflect actual risk profiles of non-bank financial institutions were

formulated according to their different features. Fifthly, the CBRC improved the procedures, methods, tools

and approaches with respect to off-site surveillance.

2. The CBRC further improved the risk early-warning function of off-site surveillance. Firstly, it continued to

provide risk early-warning through various means, such as special meetings, regulatory talks and issuance

of risk alerts. Secondly, the CBRC strengthened market discipline by adopting methods such as tri-partite

dialogues with external audit. Thirdly, the CBRC enriched the supervisory “toolkit” for off-site surveillance and

explored ways to enhance early warning function of various off-site supervisory indicators on a categorized

basis. For example, Liquidity Coverage Ratio (LCR) and Net Stable Funding Ratio (NSFR) were utilized to conduct

liquidity stress tests, thus to prejudge the potential liquidity risks facing banking institutions in some regions.

Fourthly, the CBRC conducted research on supplementing additional risk indicators for foreign banks with a

view to ward off cross-border risk contagion.

3. The CBRC optimized the supervisory rating system. Firstly, on the basis of strictly controlling the rating

criteria, the CBRC further integrated routine supervisory information with other factors and applied both

quantitative and qualitative assessments. Secondly, the rating results were used in various ways. First of all,

the results were used as the benchmark for differentiated supervision and licensing. In addition, the CBRC

instructed its local offices to notify the banking institutions within their jurisdictions of problems concealed

by the rating results, and to develop relevant supervisory plans and on-site examination arrangements

accordingly.


Box 14: Assessment of sound standards for banks’ data quality management

In 2011, in tandem with “The Year of Data Quality” campaign, the CBRC further explored the establishment of a long-term mechanism for enhancing the data quality of banks. The Management Criteria for Banking Statistical Information (Provisional) and the Implementation Plan Thereof was issued, comprising 15 principles and 61 specific criteria in five aspects, i.e. organizations and staff involved in supervisory statistical work, development of policies and rules, supporting systems, routine monitoring, and application & storage. The assessment result against each principle and criterion falls into four levels, namely “compliant”, “largely compliant”, “largely non-compliant” and “non-compliant”. The assessment was a three-step process, including self assessment by banking institutions, regular tracking by supervisors-in-charge, and assessment by external panels. Where necessary, the CBRC would urge banking institutions under assessment to develop feasible remedial plan to address the issues and problems identified for further improvement of data quality. In addition, the CBRC incorporated the assessment process and results into the overall on-going supervisory process and would take into consideration such results in the course of authorization and assigning supervisory ratings.

(III) On-site examinations

1. The CBRC followed a risk-based approach to determine the scope of on-site examinations and organize the implementation thereof. Firstly, it continued to examine key areas such as corporate governance and internal controls, LGFP loans and the implementation of “Three Rules and One Guidelines”. Secondly, the CBRC determined the scope of on-site examinations in a scientific and reasonable manner, in accordance with different risk profiles of different phases, institutions, regions and businesses. Thirdly, the CBRC insisted on identifying, evaluating and mitigating risks from the core by conducting on-site examinations at the level of legal person entities.

2. The CBRC made efforts to boost infrastructure building. Firstly, the roles of the on-site Examination & Analysis System Technology (EAST) system was further expanded to cover such areas of workflow management, examination analysis, and etc. Secondly, the CBRC continued to improve the quality control and monitoring mechanism during the process of on-site examination. Thirdly, through the establishment of databases for talents, plans, reports and problems, and the compilation of on-site examination manual, the CBRC timely reviewed and disposed of examination findings and optimized the standards and procedures for on-site examinations accordingly.

3. The CBRC placed great emphasis on supervisory interaction, coordination and innovation. Firstly, on-site examinations were conducted jointly by institutional supervisory departments and functional supervisory departments, by the CBRC headquarters and its local offices, and by different local offices to increase the coverage and intensity of examinations and to ensure supervisory consistency. Secondly, the CBRC closely integrated the self-examination of banking institutions with supervisors’ examinations so as to enhance bank’s self-discipline. Thirdly, the CBRC enhanced communication and cooperation with overseas supervisory authorities, promptly shared significant examination findings and jointly implemented corrective measures with its overseas counterparts. Fourthly, the CBRC launched a pilot program in which a local CBRC office would assume the major responsibilities for the on-site examinations over the locally incorporated banks within its jurisdictions, whereby clear-cut division of work would be ensured and centralized management, unified deployment and swift response could be realized.

4. Enforcement actions were reinforced. The specific measures taken by the CBRC included, (1) imposing administrative penalties such as fining non-compliant institutions and personnel and disqualifying senior executives; (2) providing timely risk warnings and alerts on major deficiencies commonly identified during on-site examinations; (3) tracking the progress of corrective actions by banks under punishment; (4) making examination results important factors for downgrading supervisory ratings, restricting market entry, restricting institutions from going public and appraising the performance of senior executives.

65


Box 15: Summary of key on-site examinations in 2011

1. Large commercial banks

(1) on-site examinations on the performance of special committees under the board of directors and compliance of loan extensions of 5 large commercial banks; (2) on-site examinations on consolidated management of Industrial and Commercial Bank of China (ICBC) and China Construction Bank (CCB); (3) on-site examinations on the business cooperation between Bank of China (BOC) and industrial investment funds; (4) on-site examinations on bank-fund cooperation of Agricultural Bank of China (ABC); (5) on-site examinations on bancassurance cooperation of Bank of Communications (BOCOM).

2. Small- and medium-sized commercial banks

(1) on-site examinations on the compliance of non-performing assets disposal, effectiveness of internal audit and IT system construction of all city commercial banks; (2) on-site examinations on deviations from five-category loan classification of selected city commercial banks: (3) on-site examinations on bill business of the Shanghai Branch and the Nanjing Branch of China Minsheng Bank; (4) on-site examinations on the consolidated management and wealth management business of CITIC Bank; (5) on-site examinations on engineering machinery mortgage loans of China Everbright Bank.

3. Policy banks, China Development Bank (CDB), Postal Savings Bank of China (PSBC) and banking asset management companies

(1) on-site examinations on credit asset transfer business of CDB and PSBC; (2) on-site examinations on fund usage and deposit-taking business of PSBC; (3) on-site examinations on management and disposal of acquired assets on commercial terms of China Cinda Asset Management Corporation.

4. Small- and medium-sized rural financial institutions

(1) on-site examinations on the compliance of large-value loans extension, concentration risks, deviations from five-category loan classification, and implementation of the Notice of the CBRC, PBOC and NDRC on Waiver of Some Service Charges by Banking Institutions of small- and medium-sized rural financial institutions; (2) on-site examinations on the business compliance of new-type rural financial institutions that had started operation for more than 1 year; (3) on-site examinations on the effectiveness of internal audit of one provincial rural credit union; (4) on-site examinations on the effectiveness of restructuring of two rural commercial banks.

5. Foreign banks

(1) on-site examinations on the Bank of Tokyo-Mitsubishi UFJ (China), Korea Exchange Bank (China), Bank of Montreal (China), Oversea Chinese Banking Corporation (China), Banque de I’IndoChine (China), MetroBank (China) and Washington First International Bank, with a particular focus on the aspects of corporate governance, internal controls, credit risks, market risks, liquidity risks, IT risks, and etc.; (2) on-site examinations on the implementation of real estate policies of 17 locally incorporated foreign banks’ headquarters, 58 branches thereof and 6 foreign banks’ branches; (3) on-site examinations on the credit business of the HSBC Bank (China); and (4) on-site examinations on the operational risk and banking fraud prevention and control of selected foreign banks’ branch offices.

6. Non-bank financial institutions

(1) on-site examinations on the SDIC Finance SINOPEC Finance, AVIC Finance, CDB Leasing, Kunlun Leasing, Everbright Leasing, Mercedes-Benz Auto Finance Ltd., GAC-SOFINCO Automobile Finance, and Sichuan Jincheng Consumer Finance Company; (2) on-site examinations on the bank-trust cooperation of CCB Trust, and on the real estate trust business of China Credit Trust; (3) on-site examinations on the financial leasing business in bonded areas of the ICBC Leasing, CCB Leasing, Minsheng Leasing, Banks of Communications Leasing and CMB Leasing; (4) on-site examinations on the effectiveness of internal controls and lending risks management of Dongfeng Nissan Auto Finance and Fiat Automotive Finance; (5) on-site examinations on the corporate governance, internal controls and brokerage business of Tullett Prebon SITICO(China)Limited and Shanghai CFETS-ICAP International Money Broking Co., Ltd; (6) on-site examinations on the lending business of Bank of Beijing Consumer Financial Co., Ltd.

In addition, the CBRC and its provincial offices conducted on-site examinations on the LGFP loans of banking institutions and the implementation of “Three Rules and One Guidelines”.


(IV) Market exit and risk resolution

Under the authorization of Article 136 of the Enterprise Bankruptcy Law, the CBRC facilitated and participated

in drafting the implementing rules on the bankruptcy of banking institutions.

In 2011, the CBRC encouraged city commercial banks to improve corporate governance, operation management

and internal controls, and in the meantime, made full use of policy incentives and worked closely with local

governments and stakeholders to effectively mitigate the risks facing city commercial banks. The CBRC

approved the plan of merging Pingliang City Commercial Bank and Baiyin City Commercial Bank into the Bank

of Gansu and approved the bank’s establishment. The CBRC also approved the business commencement of

Guangdong Huaxing Bank, which used to be named Shantou City Commercial Bank before reorganization,

which marked staged progress in risk resolution of city commercial banks.

The CBRC steadily facilitated risk resolution of rural cooperatives, further identified and exposed their risks,

and communicated promptly with relevant local governments; it also urged the institutions to clearly define

the responsibilities for the person primarily accountable for risk management, and implement the plans

for improving compliance with key risk indicators. In November 2011, the CBRC approved the business

commencement of the “Changbai Mountain Protection and Development Zone Rural Commercial Bank

Co. Ltd.”, which was the first successful case of establishing a rural commercial bank through M&A and

restructuring simultaneously.

The CBRC actively guided the restructuring of the remaining three trust companies out of a total of 13 that

were preparing to get re-registered. And, a highly risky financial leasing company went into liquidation

process.

(V) Penalties and punishment

In 2011, through various kinds of on-site examinations, the CBRC identified a total of RMB1.26 trillion funds

in violation of laws and regulations, penalized 1,977 banking institutions and disqualified 66 senior executives.

Cases subject to administrative punishment included violations of laws and regulations, breakings of internal

policies, misappropriation of loans, non-complaint loan extensions, illegal deposit-taking, depositing public

funds into personal accounts, unauthorized changes of offices, bribes-taking by bank senior executives and

loss of financial license by financial institutions, etc.

Supervisory cooperation and coordination(I) Domestic supervisory cooperation and information sharing

In 2011, the CBRC further strengthened policy coordination with related government agencies and promoted

cooperation with other financial supervisory authorities. It participated in the activities to prevent and combat

hot money inflows and in the formulation of macroeconomic adjustment polices pertaining to the real estate

sector. It also contributed to the chapters pertaining to the financial sector and the tertiary sector development

and reform in the 12th Five-year Plan. Besides, the CBRC made its input in a number of important researches

on financial topics, including “Improving Financial Services for Small and Micro Enterprises”, “Construction

of National Credit Data System”, “Establishing Catastrophe Insurance System”, “Financial Support for

67


Water Conservancy Infrastructures”, “Using Intellectual Property Rights as Pledges for Financing Purposes”,

“Procedures for Using Bank Cards”, and so on. Jointly with the National Development and Reform Commission

(NDRC), Ministry of Finance (MOF), Ministry of Commerce (MOC), People’s Bank of China (PBoC), National

Audit Office, China Securities Regulatory Commission (CSRC) and China Insurance Regulatory Commission

(CIRC), the CBRC issued relevant documents to further regulate the business operations of financial institutions

and improve the quality of service delivery. In addition, the CBRC, together with the CIRC, promulgated the

Guidelines for Supervision of the Bancassurance Business of Commercial Banks to maintain the order

of bancassurance market. Further, it cooperated with the CSRC to conduct examinations on the safety of

information system for cross-sector business and on-site examinations on fund selling activities in a bid to

further enhance supervisory cooperation.

(II) Cross-border supervisory cooperation and communication

1. Cross-border supervisory cooperation. In 2011,

the CBRC signed memorandum of understandings

(MOU) or other forms of agreements with

supervisory authorities of Cuba, Chile, the United

Arab Emirates, Cyprus, Argentina and Guernsey.

By the end of the year, the CBRC had altogether

signed MOUs or other agreements with its overseas

counterparts from 48 countries and regions.

2. Cross-border supervisory consultation meetings.

Based on established bilateral and multilateral

consultation mechanisms, in 2011 the CBRC held

the bilateral consultation meetings with banking

supervisory authorities of the US, UK, Canada,

Singapore, Taiwan and Hong Kong. The Sixth China-

Japan-Korea Trilateral Supervisors’ Meeting & the Fourth Deputies’ Meeting was also successfully concluded.

In addition, the CBRC actively attended the high-level cross-departmental bilateral meetings, including the

Third Sino-U.S. Strategic and Economic Dialogue, the Fourth China-UK Economic and Financial Dialogue (EFD),

the Eighth China-Singapore Joint Council Meeting for Bilateral Cooperation, the Sixth China-EU Financial

Dialogue, the Fifth China-India Financial Dialogue and the Second Meeting of the China-Brazil Economic and

Financial Sub-committee.

3. The International Advisory Council (IAC) meeting and supervisory college. In June 2011, the ninth annual

meeting of IAC was held in Beijing. It covered a range of topics, including current global macroeconomic

situations and banking developments, international financial regulatory reform and the establishment of a

prudential supervisory framework in China, the impact of Renminbi going global on China’s banking industry,

effective supervision on “shadow banking”, regulation of Systemically Important Financial Institutions, the

clean-up and regulation for LGFP loans and stress testing for property loans. In November, the CBRC held

the Supervisory College of China Construction Bank (CCB) International, at which it exchanged information

with CCB’s host supervisory authorities regarding the operational status of the CCB group and its overseas

branches, and communicated and coordinated respective supervisory means and approaches.

In November 2011, Chairman SHANG Fulin attended and addressed the Supervisory College

of China Construction Bank (CCB) International.


4. Cross-border on-site examinations. In 2011, the CBRC cooperated with supervisory authorities in Japan,

Korea, the Philippines, Thailand and Hong Kong to carry out 14 cross-border on-site examinations on locally

incorporated foreign-funded banks in China, and participated in supervisory meetings with its overseas

counterparts, shared substantial examination findings, and worked with them to ensure implementation

of corrective actions. The CBRC also established a communication and coordination mechanism for on-site

examinations with the Hong Kong Monetary Authority (HKMA), through which they collaborated closely on

the planning and implementation of on-examinations on the Hong Kong-funded banks in the Mainland and

on subsequent follow-up actions as well.

In addition, based on the platform of Party School, the CBRC held the first Economic and Financial Elite Seminar

for senior Hong Kong banking practitioners. Attended by 36 senior officials from HKMA and executive officers

from banking institutions in Hong Kong, this seminar helped to deepen the exchanges between the banking

sectors in the Mainland of China and Hong Kong.

Box 16: The first consultation meeting between the cross-strait banking supervisory authorities

In April 2011, the First High-Level Cross-Strait Consultation on Banking Supervision was held in Taipei.

Communication was made between the CBRC delegation and the representatives of the Taiwan financial supervisory

agency. Two sides held discussions on the establishment of cross-strait banking supervisory cooperation mechanism.

Following the discussions, three key areas for cooperation, namely “routine contact”, “mutual visit and exchange”

and “on-site examination”, were confirmed and specific workflows were agreed on. In accordance with the

arrangement, the First Cross-Strait Consultation on Banking Supervision at working-level was held in Beijing in

August. In-depth discussions were conducted on issues such as cross-strait licensing, supervisory cooperation and

international financial regulatory reform. In November, the Second High-level Cross-Strait Consultation on Banking

Supervision was held in Beijing. The exchanges and interactions between banking supervisory authorities marked

a new stage for the cross-strait banking supervisory cooperation, and created a favorable environment for the

prudential operations and the stability of cross-strait banking industries.

Organizational development

(I) Organizational structure

In 2011, aiming at “improving the effectiveness of supervision and integrating supervisory resources”, the CBRC

further improved its supervisory organizational structure, clarified the supervisory duties of its HQ departments

and local offices, and enhanced both vertical and horizontal coordination. Firstly, based on the principle of

conducting consolidated supervision and local supervision, the CBRC readjusted the organizational structures

of its local offices at all levels to be basically consistent with the arrangement of supervisory departments at

the Head Office. Secondly, the CBRC established the joint supervisory conference mechanism. In 2011, the

CBRC held two joint conferences on licensing, two joint conferences on on-site examination and one joint

69


conference on functional supervision, during which similar projects were well coordinated and common issues

were addressed. Thirdly, the CBRC enhanced the interactions between its HQ departments and local offices

by various platforms like the joint supervisory conference on large banks and the joint meeting on licensing of

small- and medium-sized commercial banks. Fourthly, in the course of routine supervision, the CBRC actively

pushed forward the functional interactions among licensing, on-site examination and off-site surveillance in

a bid to enhance mutual support, cross-checking and create supervisory synergy.

(II) Human resources development

As of end-2011, the CBRC and its local offices possessed a total of 23,838 staff, including 586 at the head

office, 5,730 at provincial offices, 13,452 at field offices and 4,070 at supervisory agencies, accounting for

2.5%, 24%, 56.4% and 17.1% respectively. Of all, female staff numbered 7,747 or 32.5%; staff holding

an undergraduate degree or higher numbered 18,441 or 77.4%; and, staff under the age of 45 numbered

14,067 or 59 percent.

(III) Staff training

In 2011, the CBRC continued to enhance training programs and broadened the training coverage. Altogether,

29 supervisory workshops were held, covering 87 training days and 1,987 trainees. To make training more

targeted and professional, the CBRC organized different training programs on a categorized basis, covering

the areas of leadership, advanced supervisory methodologies, supervisory know-how and English language

etc. In addition, the CBRC translated and published a series of overseas training textbooks on supervision,

conducted network training and examination programs and delivered on-site training courses in 7 provinces

including Gansu. Further, it launched training programs for around 5,600 senior executives and key staff from

small- and medium-sized commercial banks, and for around 1,400 supervisory officials at grassroots level.

(IV) Cultural development

In 2011, the CBRC continued to promote the fostering of a sound supervisory culture in conjunction with

routine supervisory work, anti-corruption campaign and the development of corporate culture at banking

institutions, so as to bring the role of supervisory culture into full play. By taking a practice-oriented approach,

the CBRC organized a number of seminars and workshops to address the important, strategic and forward-

looking topics related to banking reform, development and supervision. It also made efforts in building up a

positive and inspiring cultural atmosphere by means of holding thematic exhibitions and educational activities,

such as the CPC 90th Anniversary celebration and the serial workshops titled “Brilliant Banking Industry”.

In addition, it pressed ahead with the “Pursuit for Excellence” campaign and held award ceremonies for

the personal and institutions with outstanding performance, in a bid to set examples and rolled out best

practices.


(V) Anti-corruption campaign and disciplinary arrangements

In 2011, by focusing on the promotion of professional ethics, the CBRC continued to improve the anti-

corruption mechanism and enhance the disciplinary arrangements.

1. Promotion of professional ethics. Efforts were made to promote the professional ethics, integrity and

learning atmosphere within the CBRC, and encourage senior officials to make field trips to places at the

grassroots level. In 2011, altogether 16,046 banking institutions and 1,825 local government agencies and

NGOs took part in the CBRC professional ethics rating activities, whose results showed an overall satisfaction

of 98.02%.

2. Building up of anti-corruption mechanism. In 2011, the CBRC Anti-Corruption Mechanism Building Task

Force broke down and assigned major tasks, and organized 5 teams to inspect the work at 12 provincial

offices with respect to anti-corruption activities and implementation of the Code of Ethics.

In September 2011, Vice Chairman Cai Esheng

made a field trip to Inner Mongolia.

In February 2011, Vice Chairman ZHOU Mubing

attended and addressed the work conference on

supervision of large banks.

In May 2011, Vice Chairman GUO Ligen attended and

addressed the meeting of China Financial Union.

In May 2011, WANG Huaqing, Disciplinary

Commissioner, attended one of the serial workshops

titled “Brilliant Banking Industry”.

In May 2011, Vice Chairman WANG Zhaoxing

attended the work conference on data quality of

statistical information.

In March 2011, Assistant Chairman YAN Qingmin

made briefings on hot banking issues before the

news media.

71


3. Development of anti-corruption rules. In an effort to prevent conflict of interests, 15 departments at the

CBRC head office reviewed 409 rules and regulations pertaining to anti-corruption and put forward relevant

amendment suggestions.

4. Anti-corruption education and publicity. 452 lectures were delivered by the heads of Party committees at

all levels of the CBRC, and 405 lectures on professional ethics and Party disciplines were delivered by the

heads of disciplinary committees. The CBRC headquarters and local offices carried out a variety of exhibition,

education and publicity activities in relation to ethics and integrity.

5. Inspection tours. Inspection tours in 2011 covered 8 local offices and 1 CBRC-supervised banking institution,

where 68 cases of disciplinary breach were identified and 63 corrective actions were recommended. In addition,

23 CBRC provincial offices and 5 CBRC-supervised banking institutions made inspection tours respectively to

65 CBRC field offices and 42 banking outlets, marking a deepened role of such tours.

6. Internal oversight and ad-hoc work. In 2011, the CBRC enhanced the oversight on senior officials, for

example, requiring them to report relevant personal matters, and particularly strengthened management of

those whose spouses and children have immigrated overseas. In 2011, officials at all levels of the CBRC made

altogether 10,877 integrity briefings in their performance review, and 2,987 senior officials were investigated

for integrity performance before taking new post. In 2011, 154 individuals were interviewed for their possible

breach of ethics and integrity rules, and 205 were investigated by means of correspondence. The CBRC

headquarters and its local offices altogether cancelled 14 ceremonies, seminars and forum activities. In an

effort to curb the use of official cars, the CBRC conducted an all-round survey on over 2,100 departments

and local offices. Besides, it also inspected the implementation of the Requirements for the Integrity of

Senior Management of State-owned Enterprises by the CBRC-supervised banking institutions.

7. Investigations of rule-breaking cases and complaint handling. In 2011, the CBRC received 797 complaints,

of which 571 (excluding repetitive pieces) were handled. It also made investigations into 3 cases pending

from 2010 and 14 new cases in 2011, involving 3 individuals and 24 individuals respectively; as of end-2011,

9 cases had been settled and 16 individuals were subjected to disciplinary actions.

8. Rule enforcement inspections and internal audit. In 2011, the CBRC and its local offices conducted 477

rule enforcement inspections, where 4,693 problems were identified and 1,551 pieces of inspection opinions

were raised, of which 677 pieces had been implemented as of the year end. In 2011, the CBRC conducted

rule enforcement inspections, for the first time, on administrative licensing of its supervisory departments.

In addition, it conducted internal audit on the head persons of 7 provincial offices and one CBRC-supervised

banking institution.

9. Anti-bribery work. The CBRC issued the Guidelines on the Professional Ethics of Banking Practitioners

and urged banks to strictly implement it. In 2011, the CBRC received 6 commercial bribery cases reported by

banking institutions, involving 8 individuals, of which 3 cases had been resolved at the year end.


(VI) E-government

In 2011, the CBRC

continued to enhance IT

security and promoted

the construction of key IT

systems to better support

the supervisory work.

In the meantime, it put

forward the road map for

IT development during

the “12th Five-year Plan”

period. Firstly, the CBRC

enhanced IT security by

having in place an internal

encryption system for

e-document transmission,

starting to upgrade the

categorized information protection system and making continuous efforts to improve relevant technologies.

Secondly, the CBRC pressed ahead with the migration and upgrading of the off-site surveillance information

system and the promotion and application of the on-site EAST system, and launched seven newly developed or

upgraded application systems, including the China Financial Youth website, etc. Thirdly, the CBRC set out the

guiding opinions and targets for the development of its IT systems during the “12th Five-year Plan” period in

line with the principle of “objective, scientific, applicable” and in the spirit of “meeting the needs of banking

supervision”. During the “12th Five-year Plan” period, the CBRC will complete five IT projects, i.e., improving

the IT management system, strengthening the infrastructures, boosting the development and application of

information resources of banking supervision, enhancing the development of information protection system

and improving the supporting systems for IT operation.

Box 17: CBRC office automation system and official website development

In 2011, the CBRC office automation (OA) system was promoted to its local offices, and various applications were

upgraded and optimized to achieve further interconnection and information sharing. E-office was largely achieved

in the CBRC head office. In addition, all CBRC local offices had put into place an e-document system in a bid to

increase the efficiency of document transmission to and from banking institutions.

In 2011, the CBRC official website was revised. Aiming at improving government information disclosure,

government-public interactions and online service delivery, the new website featured a number of innovations in

terms of webpage design, column setting and functional improvement. In addition, sub-sites were set up at the

CBRC local offices, thus forming a joint website maintenance system for resources sharing, vertical interactions

and coordination.

Homepage of the official website of the CBRC.

73


73


(VII) Allocation of financial resources

In 2011, centering on improving the effectiveness of banking

supervision, the CBRC allocated its financial resources in an

efficient manner. It standardized the financial management

arrangements, improved the quality of budget management,

and further enhanced transparency. Firstly, the CBRC managed

the funds on a centralized basis, so as to ensure the fulfillment

of the supervisory tasks with high priority. In 2011, the CBRC

spent more money on on-site examinations and supervisory IT

system development, and secured the funding needs of frontline

supervisory work. Secondly, the CBRC further standardized the

process and procedures in financial management at all levels. To

achieve this, a series of measures were adopted, for example,

assessing financial management arrangements via a combination

of on-site examinations and off-site surveillance, taking measures

to tackle the issue of unit-owned money box, and improving

the MIS system for fixed-assets management etc. Thirdly, the

CBRC continued to improve budget management by adopting an

integrated management approach covering the aspects of budgeting, allocation, execution and evaluation.

Fourthly, the CBRC enhanced information disclosure by publishing on its website the 2010 final annual

accounts, 2011 budget, as well as expenditures related to its official receptions, vehicles and overseas trips

(see Fig. 9).

Chart 9: 2011 Budget allocation by project

2%

3%

6%2%

33%

22%

25%

7%

Inspection projects

Conferences and meetings

Automobile procurement

Office Building renovation

E-government projects

Office building rental

Office equipment procurement

Anti-illegal fund raising and others

Documents

CHINA BANKING REGULATORY COMMISSION 2011 Annual …zhuanti.cbrc.gov.cn/subject/subject/nianbao2011/English/Part Four... · 60 2011 CHINA BANKING REGULATORY COMMISSION Annual Report