system and - zhuanti.cbrc.gov.cnzhuanti.cbrc.gov.cn/subject/subject/nianbao2008/english/4.pdf · I. Prudential legal and regulatory framework ... banking environment and banking institutions,

Regulatorysystem and

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of execution

Regulatory

Improve Regulatory Framework and Enforcement

Part Four

I. Prudential legal and regulatory framework

In 2008, following the macroeconomic policies,

the CBRC took into account the changes in the

banking environment and banking institutions, and

improved regulatory framework by formulating and

adopting 3 department rules and 80 regulatory

documents.

1. Strengthen rule-making

(1) Formulate and revise rules and regulatory documents

Firstly, the CBRC worked the formulation of the Regulation on Deposit Insurance and led in

drafting the Regulation on the Bankruptcy of Banking Institutions. A great deal of work was

done in pushing forward the legislation of deposit

insurance and bankruptcy of banking institutions,

from a theoretical perspective to a drafting

stage. Secondly, initiated in 2007, the CBRC was

continuously improving the rules and guidance

regarding loan management, drafed the Rules on Working Capital Loans (Tentative), the Rules on Fixed Asset Loans (Tentative), the Rules on Retail Loans (Tentative) and the Guidance on Project Financing. Through refining the

process and procedures for loan management,

the rules and guidance aim to promote credit risk

management of banks, and to cultivate a better

credit culture. The new rules and guidance were

consistent with the existing rules and regulations,

and provided more comprehensive requirements,

with a focus on the management of lending

process, loan purpose and contracts. The new

rules and guidance clarified the post-lending

review procedure and incorporate legally binding

factors to the use of bank credit and would play

a vital role in preventing the misappropriating of

bank credits, ensuring the sufficient financing

to the real economy, and improving funding

efficiency.

(2) Take appropriate counter-cyclical measures

In 2008, the CBRC firmly exercised counter-

cyclical regulation in line with macroeconomic

policies of the central government. It introduced

regulatory rules to strike a balance between

managing banking risks and supporting the

economy. Firstly, the CBRC introduced the

Guidance of Risk Management on Merger and Acquisition Loans of Commercial Banks

and the Guidance on Issues Relevant to Establishing Special Agencies for Small Business Lending by Banks, allowing banking

institutions to carry out M&As, and strengthened

support to the macroeconomic adjustment and

development of SMEs. Meanwhile, the CBRC also

issued the Notice on Adjusting Credit Policies to Promote Sound Economic Development, adjusted credit policies on ten aspects. Secondly,

the CBRC effectively warded off cross-sector risk

contagions and enlarged the scope of regulation

by establishing cooperative mechanisms with

China Securities Regulatory Commission (CSRC)

and China Insurance Regulatory Commission

(CIRC) to leave no regulatory gaps. Thirdly, the

CBRC took prompt actions in formulating rules

and sending risk-signals on the potential risks of

financial innovation and wealth management in

the market volatility, and urged banks to follow the

principle of “controllable risk, measurable cost,

Improve Regulatory Framework and Enforcement64

Annual Report 2008

and adequate information disclosure” in day-to-

day operations.

(3) Formulate rules to address contingency issues

Immediately after the snowstorm and

earthquake disasters in 2008, the CBRC took

prompt measures and activated contingency

mechanisms, issued a series of notices, such as

the Urgent Notice of China Banking Regulatory Commission on Calling for Financial Support for Earthquake Relief, and the Urgent Notice of China Banking Regulatory Commission on Write-off of Bad Loans Caused by the Sichuan Earthquake, so as to provide all possible support

on disaster reconstruction, bad loan write-offs,

exempting transfer charges of donations, and

other relief programs. In order to ensure the

safety and soundness of financial services to

the Olympic Games, the CBRC improved the

rules and regulations related to IT risks, and

issued the Notice of China Banking Regulatory Commission on Risk Warning of the Special Self-Inspection of the Information Technology in Banking Institutions for the Olympics.

(4) Improve mechanism to achieve comprehensive regulatory regime

The CBRC timely issued the Banking Legislation Plan, to put in place explicit short-term and long-

term targets for banking legislation. In short term,

based on reviewing existing rules, prudential

regulations will be formulate to fill the gaps in

current legal framework. The long-term vision is to

strengthen the risk-based prudential supervisory

framework, and to establish a multi-layered,

comprehensive, open and transparent banking

legal structure.

2. Standardize regulatory enforcement activities

To attain this aim, the CBRC introduced

the Registration Form for Recording Administrative Approval and Non-administrative Approval Items, and issued

the Implementing Rules of China Banking Regulatory Commission on Administrative Licensing Matters Concerning Small and Medium-sized Rural Financial Institutions in 2008. Meanwhile, the CBRC continued to

strengthen the legal review on administrative

punishment, improved the administrative

punishment mechanism and issued the template

for administrative punishment. The administrative

reconsideration and responding work carried

on steadily. In 2008, the CBRC received 17

administrative reconsideration applications. 16

of those were accepted and 1 was denied. The

CBRC also dealt with 11 lawsuits in relation to

administrative matters.

Left: On May 27, 2008, Vice Chairman JIANG Dingzhi paid a field visit to Huzhou, Zhejiang to examine rural financial services.

Right: On April 21, 2008, Vice Chairman CAI Esheng paid a field visit to Yunnan, and listened to opinions from directors of Yunnan office and local banking institutions.

Improve Regulatory Framework and Enforcement 65

3. Coordinate with other government agencies to improve banking operation environment

The CBRC took proactive moves to enhance

coordination and cooperation with government

agencies, such as NDRC, MOST, MIIT, MOF,

Ministry of Land and Resources (MOLR),

MOHURD, PBOC, SAT, GAC, CSRC and CIRC.

The joint measures improved tax mechanism

and established risk compensations, in a bid to

improve the environment for banking operation

and promote banking development.

4. Participate in national legislation

In 2008, the CBRC participated in the amendment

process of the Criminal Law Amendment VII and presented issues to be addressed within

the judicial interpretation of the Labor Contract Law. Meanwhile, the CBRC provided opinions

on adopting and revising the Insurance Law (Drafted), the Administrative Supervision Law

and the Regulations on the Foreign Exchange System etc. As a member of the Anti-Monopoly

Commission designated by the State Council,

the CBRC also participated in drafting the Anti-Monopoly Law.

II. Supervisory pocess and enforcement

1. Licensing (Authorization)

(1) Institution licensing to underpin the national economic and financial development plan and market demands

Firstly, following the development of banking

sector, the CBRC pegged the market entry

requirements with the supervisory risk-ratings,

and strengthened the examinations on banking

institutions, including the examinations on

banks’ business strategy, corporate governance

and internal control systems etc. Secondly, in

closely monitoring the development pattern of

small and medium-sized commercial banks,

the CBRC continued to support eligible city

commercial banks to set up inter-regional

branches, encouraged small and medium-sized

commercial banks to set up rural branches, and

adjusted policies to attract more private capital

into the rural financial institutions. Thirdly, the

CBRC promoted foreign banks to incorporate

local subsidiaries. In 2008, the CBRC authorized

4 foreign banks to prepare for being locally-

incorporated and 5 to commence business as

local subsidiaries. Fourthly, the CBRC encouraged

small and medium-sized banking institutions to

establish specialized SME service agencies.

CMB set up the SME specialized service center

in Suzhou (Jiangsu Province) for nationwide SME

clients. Many other banks are also applying for

establishing similar agencies serving SMEs.

(2) Product authorization focusing on promoting innovation

Based on the “Six Mechanisms”, the CBRC innovated the model of business authorization


Annual Report 2008

for SME lending. The priority list of product liberalization included the following business areas: the business that is in line with the national treatment requirement and fair competition principle; and the business that does not endanger the interests of consumers and the financial safety and soundness. Moreover, the CBRC would also deregulate the specific service and product innovation under large category of business or change the process of examination and authorization from prior approval to prior registration with on-going oversight and timely correction. Meanwhile, the policies on financial services to rural areas and small enterprises could be relaxed with more flexibility. The CBRC also considered opening up “green-light channel” for branch license or new business license if the applying banking institutions maintain a sound record of supervisory ratings or risk management performance.

(3) Standardize approvals for senior management

The CBRC established the rules on overseeing

performances of bank’s board directors and

senior management, including interviews, written

tests, and commitments. In addition, the CBRC

strengthened the management of shareholder’s

qualification by examining its sources of fund

and financial positions, together with the on-

going oversight of the shareholders whose share

proportion is more than 5 percent.

2. Off-site surveillance

(1) Improve information system for off-site surveillance

The information system for off-site surveillance

on legal entities has functioned smoothly. The

collection of all types of regulatory reports

has been timely, accurate and complete. In

January 2008, the information system for off-site

surveillance on branches was officially launched

together with the early-warning system for bank

risks (Box 12).

Box 12: Early warning system for bank risks

As China’s banking industry becomes more opened-up and complex, with intensified competition among banking institutions, stability of the banking system has been impacted by many uncertain factors. The current global financial crisis has indicated that risk forcast prediction and prevention in advance would be more effective than post-correction. Recognizing this, the CBRC promptly initiated the “early-warning system for bank risks” project in 2007. As a sub-project of the “Electronic Financial Services Project”, “early -warning system for bank risks V1.0” was officially launched in October 2008 and obtained computer software copyright.

Early-warning system for bank risks includes basic services, functional service, knowledge management and data storage. Through a direct connection with off-site surveillance information, the system generates warning indicators to screen banks and distinguishes between potential high-risk banks and low-risk banks. In addition, the system utilizes advanced technology to develop a series of early-warning instruments, which aim to identify both the overall risk and abnormal indicators of a single bank and to


timely produce early-warning reports. With professional judgments of regulators and other information, regulatory authorities could utilize the information generated by the early-warning system to identify and assess risk more effectively. The early-warning system also leads supervisory judgments more forward-looking, reduces costs and improves regulatory efficiency through effectively allocating supervisory resources. The early-warning system has been developed on the basis of extensive research and has been another significant improvement after the CBRC Information System for Off-site Surveillance (ISOS). The early-warning system has played an important role in both identifying single bank risks and preventing systematic risks in the banking sector. Coupled with the risk-based supervision, the base of the ISOS and the upcoming on-site examination system, a comprehensive risk monitoring framework for bank risks came into being. It would contribute to the continuity and efficiency of the banking supervision.

(2) Prioritize off-site surveillance

In 2008, The CBRC strengthened the risk

monitoring, including banks’ risks exposure, loan

migration, loan loss provisions and write-offs. It

also improved the interactive monitoring system

of large NPLs in large commercial banks focusing

on trends and migration of large NPLs, changes in

customer profile and progress in distressed assets

disposal. Moreover, the CBRC established the

monitoring system for banks’ investment behavior,

including monthly analysis on foreign currency

bond investment, quarterly analysis on potential

high-risk institutions and monthly tracking of the

profit and loss on banks’ bond investment.

(3) Supervisory ratings

The CBRC conducted peer-group analysis by

using the “CAMELS+” rating system. According

to the results, the CBRC allocated supervision

resources and took licensing and other

supervisory actions.

(4) Improve guidance and early-warning mechanism

The CBRC signaled banks on the potential risks

of fast loan growing, credit flowing to the capital

markets and real estate, overseas investment,

wealth management, and loans to high polluting

and energy consuming industries, etc. The CBRC

on-site examiners have also held supervisory talks

with banks which exposed to high potential risks.

(5) Improve supervisory dialogues and trilateral meetings

The CBRC held supervisory meetings with board

members and senior executives of banking

institutions to address risks identified during

day-to-day supervision, major management

issues and the impact of macro policies and

international market changes. The CBRC also

called trilateral meetings with the bank and the

bank’s external auditor. Through these efforts, the

market discipline and the professional knowledge

of accounting firms were leveraged to monitor

banks in terms of supervisory compliance. In the

meanwhile, the CBRC has developed a more

sophisticated and comprehensive framework

on monitoring bank’s risk profile and risk

management capacity.

3. On-site examinations

In 2008, the CBRC closely monitored the banks

risk profile. By introducing new supervisory tools,

the CBRC integrated technology and expertise

and utilized the outcomes of on-site examination.


Annual Report 2008

Box 13: Summary of key on-site examinations

1. On-site examinations of large commercial banks(1) On-site examinations of performances of directors and senior management of five large banks; (2) On-site examinations on major NPLs of the branches of five large banks;(3) Regular on-site examinations on branches of five large banks;(4) On-site examinations on corporate banking business of the ICBC and the consolidated business of its affiliates (ICBC-Credit Suisse Asset Management Co., Ltd., ICBC (Indonesia), ICBC (Asia) Co., Ltd.);(5) On-site examinations on overall risk management in the ABC;(6) On-site examinations on information technology security and investment business in the BOC;(7) On-site examinations on fee-based business, foreign currency investment business of the CCB and its Tokyo branch; and(8) On-site examinations on real estate loans of the BOCom and its New York branch.

2. On-site examinations on small and medium-sized commercial banks(1) On-site examinations on the joint-guaranteed loan and wealth management business of China Everbright Bank (CEB); (2) On-site examinations on credit approval procedure management of CITIC Bank;(3) On-site examinations on NPL disposal and share issuance of Ningxia Bank and Luoyang City Commercial Bank; and(4) Regular on-site examinations on joint-stock commercial banks and city commercial banks.

All these efforts largely improved the accuracy and

effectiveness of the examination. During the year,

the CBRC examined 46,100 banking institutions,

among which 873 banks were penalized, 78

person/times were voided qualifications of senior

executive.

(1) Plan on-site examination projects

In 2008, the CBRC scientifically leveraged the

results of the off-site surveillance to plan on-site

examination projects on a risk-based approach,

i.e. high risk leads to intensified examination

and vice versa. By this principle, the key

institutions, key regions and businesses were

thus identified. According to the identification,

on-site examinations targeted on reviewing

performances of banks' directors of the board

and senior management, loans to large clients,

bond investment, consolidated operation,

comprehensive risk management, IT security,

credit line to group clients, fee-based business,

real estate loans, and wealth management

products etc. (Box 13).

The CBRC launched on-site examination

for the first time on the large commercial

bank’s consolidated operation. According to

the requirements specified in the Notice of China Banking Regulatory Commission on Implementing the Provisional Guidance on Consolidated Supervision Over Banks, the

CBRC focused on banking group’s overall risk,

and strengthened the supervision on selling

identical products to similar customer bases or

operating in the overlapped market within a bank

group. ICBC-Credit Suisse Asset Management

Co., Ltd., ICBC Indonesia Co., Ltd., and ICBC

(Asia) Co., Ltd. were examined.


3. On-site examinations of policy banks, the PSBC and asset management companies(1) On-site examinations on implementation of lending procedure requirement of policy banks;(2) On-site examinations on “bundled loans”, soft loans and off-balance sheet activities of the CDB;(3) On-site examinations on business operating and risks of commercial loans in the ADBC;(4) Comprehensive examinations on anti-fraud risk control of the PSBC; and(5) On-site examinations on investment and agent business of China Great Wall Asset Management Corp. (CGWAMC) and CHAMC.

4. On-site examinations of rural financial institutions(1) On-site examinations on the performance and operation conditions of provincial RCCs;(2) On-site examinations on expansion of share and capital injection, assets swap, loan deviation, new loans, large valued loans and loans to high polluting and energy consuming industries of rural cooperative financial institutions;(3) On-site examinations on the profit and provisioning of rural cooperative financial institutions; and(4) On-site examinations on measures of anti-fraud mechanism of rural cooperative financial institutions.

5. On-site examinations on non-bank financial institutions(1) Comprehensive examination on New Times Trust &Investment Co., Ltd., China Petroleum Finance Co., Ltd., AVIC I Finance Co., Ltd., Dongfeng Peugeot Citroen Automobile Financing Co., Ltd. and five subsidiary financial leasing companies; and(2) Special examinations on security and real estate business of China Credit Trust Co., Ltd., Yunnan International Trust& Investment Co., Ltd. and New China Trust Co., Ltd..

6. On-site examinations of foreign banks(1) On-site examinations on corporate governance of eight new locally incorporated foreign banks; and (2) On-site examinations on risk management and internal control of large locally incorporated foreign banks

(2) Develop and utilize the EAST system

In 2008, the CBRC developed the Examination

& Analysis System Technology (EAST) for on-

site examinations (Box 14). The EAST system

facilitates analysis by collecting raw data

directly from commercial bank headquarters’ IT

system. Following the principle of “consolidate

supervision, risk-based supervision and internal

controls”, the EAST aims to be information-based,

comprehensive, integrated and standardized

in inspection. Together with the ISOS, the

EAST completes the IT support structure for

the supervisory process and contributes to

supervisory efficiency. During the year, the EAST

system was successfully piloted for the on-site

examinations of the ICBC and the CMBC.

(3) Improve on-site examination procedures and methods

Following the risk-based approach the CBRC

launched pre-examination investigations on key

businesses and on the management and internal


Annual Report 2008

Box 14: The CBRC’s on-site examination system

In 2008, the CBRC developed an on-site examination system, namely the Examination & Analysis System Technology (EAST). During the testing, the EAST delivered effective in-depth analysis on complex data of banking institutions and improved effectiveness of on-site examination.The EAST has strong massive information analytic functions and essence on-site examination applications. The EAST system consists of three modules, including the examination system, the project management system and the regulatory information platform. The examination system is the key of the EAST. It provides the baseline analysis on banks’ raw data. The project management system together with the regulatory information platform supports on-site examination project management, task allocation, process control, regulation searching, and other examination methodologies,. It assists in information collecting, training and standardizing supervisory work.

controls of targeted institutions. The examiners

were required to strictly follow the On-site Examination Procedures of the China Banking Regulatory Commission when preparing and

conducting on-site examinations, reporting and

enacting supervisory enforcement. Both the

leader of the examination team and the Chief

Examiner should assume full responsibility of the

on-site examination.

In the meanwhile, the CBRC has streamlined

the internal procedures for allocating on-site

examination resources. Firstly, put into practice

the joint-onsite examinations within the regulatory

bodies. The CBRC has also increased the

cooperation with banks’ internal auditors and

professional and specialized auditing firms to

conduct comprehensive on-site examinations.

(4) Review on rectification and post-evaluation

The CBRC followed up every examination to

ensure that problems identified are corrected . In

the meanwhile, the CBRC made full use of each

on-site examination to accumulate experience

and advance the examining skills. The CBRC

also carried on post-evaluations on the each

examination and correction.

4. Risk resolution(1) Promote risk resolution of high-risk institutions

In 2008, the CBRC appointed professional

supervisors to focus on high-risk institutions in

accordance with supervisory ratings. Institutions

with high risk were urged to set up risk mitigation

programs, accelerated risk resolution process and

increased disposal efficiency.

(2) Deliver significant outcome for risk resolution

The high-risk city commercial banks and UCCs

have largely retreated from the market. By the

end of 2008, all city commercial banks met the

regulatory capital adequacy requirement. Only 11

UCCs were yet to be restructured and 12 UCCs left

in suspension. Notable progress was made in risk

resolution for non-bank financial institutions with 7

high-risk trust companies and 13 problematic trust

companies retreating from the market.


III. Major Regulatory Initiatives

1. Capital Regulation

(1) Urge banks to meet CAR requirement

In 2008, the CBRC put priority on urging

commercial banks to meet the CAR requirement

in a bid to enhance their risk resilience. Firstly, the

CBRC formed synergy with government agencies,

regulatory authorities and commercial banks to

enhance the capital adequacy at commercial

banks and to push forward their risk resolution.

Secondly, the CBRC urged commercial banks to

take initiatives for capital injection. Various actions

were taken to encourage banks to build stronger

capital base, including organizing seminars,

issuing regulatory documents, and adopting the

CAR requirement as the precondition for new

business license. As a result, commercial banks

made remarkable efforts to replenish capital by

issuing new shares, cutting down on risk assets,

increasing reserves, as well as writing-off bad

loans. Thirdly, the CBRC pressed commercial

banks to improve capital-based operation,

strengthen capital constraint, and strike a balance

between businesses growth and capital adequacy.

Last but not the least, the CBRC encouraged

banks to explore diversified capital replenishment

channels (Chart 9). The CBRC continued to

support commercial banks to replenish tier-2

capital through issuing subordinated debt, and

encouraged banks to explore new types of

capital vehicles such as innovative hybrid tier-1

capital bonds and stripped convertible corporate

bonds, for the purpose of gradually improving

the framework for commercial banks’ capital

replenishment.

The CBRC set strict capital requirement pursuant

to prudential regulatory principle. Firstly, the

CBRC sets strict limit on the proportion of tier-2

capital, adequacy ratio of core capital, and

subscription of subordinated bonds by non-

bank financial institutions. Secondly, commercial

banks that engaged in cross-sector and cross-

border businesses were required to maintain a

higher level of capital. Thirdly, the CBRC has also

strengthened the examinations on loan migration

and asset swaps to ensure capital adequacy ratio

has been calculated accurately.

By the end of 2008, the assets of banks that met

the CAR requirement accounted for 99.9 percent

of the total assets of the banking industry. All

major commercial banks have satisfied minimum

capital requirement. This symbolized a historical

breakthrough in the development of the China’s

banking sector.

17 percent

20 percent

23 percent

9 percent

31 percent

Chart 9: Capital Replenishment of Major Commercial Banks (2008)

By issuing subordinated bonds By others

By listing By governmentBy institutional investors


Annual Report 2008

Box 15: Proactively promote implementation of the New Capital Accord

During 2008, drawing upon the local market practice, the CBRC identified some weaknesses in the implementation process of the New Capital Accord which were revealed in the global financial crisis. On top of this, the CBRC further promoted the implementation initiative, and launched extensive rule-making efforts for the implementation. In September 2008, the CBRC issued the first batch of five supervisory guidance on the implementation of the New Capital Accord, namely the Guidance on Risk Exposures Classification of Commercial Banks, the Guidance on Supervision of Internal Rating System of Commercial Banks, the Guidance on Capital Charge for Specialized Lending of Commercial Banks, the Guidance on Implementing Risk Mitigation in Basel II by Commercial Banks, and the Guidance on Capital Charge for Operational Risk of Commercial Banks. The second batch of supervision guidance is expected to be available shortly.

In order to provide guidance for the banks’ preparation to implement the New Capital Accord, the CBRC has established a designated project team to carry out in-depth research, such as, risk management of specialized loans, measurement of the New Capital Accord ’s quantitative impact, liquidity risk management and supervision, methods and efficiency of cross-border supervision under the New Capital Accord, interest rate risk management, and information disclosure. In the meantime, the CBRC has attached great importance to international cooperation and exchange, and invited experts from the IMF, the Basel Committee and international commercial banks to jointly explore solutions for technical issues. Furthermore, the project team has dispatched more than 20 experts to attend a series of international seminars on the New Capital Accord, so as to keep abreast with the implementation progress of the New Capital Accord overseas.

Large commercial banks have made significant progress and achieved early outcomes with regard to preparation for the New Capital Accord implementation under the CBRC’s support. Among the seven pilot banks, six of them have developed their internal rating systems that could cover most of their credit assets, with the coverage ratio ranging from 60 percent at the minimum and 100 percent at the maximum. Also, six of them have established debtor rating system for corporate risk exposures; four banks started the development of debt rating system; three banks completed the internal rating system for retail risk exposures. All of the seven banks have

(2) Promote implementation of the New Capital Accord

In September 2008, in order to urge the large

commercial banks to prepare for the New Capital Accord implementation, the CBRC issued the

first batch of regulations for carrying out the

New Capital Accord (Box 15). In formulating

the implementation scheme for the New Capital Accord, the CBRC took into account the reality of

the China’s banking industry, and prioritized the

objectives of enhancing banks’ risk management

and improving its own regulatory capacities.

The CBRC worked out guiding principles for the

implementation, took into consideration the latest

developments of the New Capital Accord in the

context of the global financial crisis, and pressed

ahead with the preparation in a step-by-step

manner.


set up market risk management framework; three banks are capable of calculating VAR on a daily basis, and conducting day-to-day stress-testing. The internal rating systems for corporate risk exposure of six banks have started to function in the processes of credit review and approval, risk monitoring and limit setting. Meanwhile, infrastructure construction of commercial banks’ data management and IT system has been constantly improved. Four banks have established unified, company-wide database that can perform automatic collection of data. Two banks have built up multi-layered data warehouse.

2. Supervision on corporate governance and internal control(1) Improve corporate governance

The CBRC further urged commercial banks to

improve corporate governance as the cornerstone

for sound business growth. Firstly, the CBRC

tried to advocate best practices by setting rules

and regulations. In 2008, the CBRC conducted

a specific study on in small and medium-sized

commercial banks’ corporate governance, based

on which, the CBRC worked out the Opinions on Further Improving the Corporate Governance of Small and Medium-sized Commercial Banks.

Secondly, the CBRC took initiatives to address the

prominent problems in the corporate governance

of banking institutions. For example, the banking

institutions have been required to further improve

board election, optimize equity structure and

standardize shareholders’ behaviors. Thirdly, the

CBRC has urged banking institutions to improve

incentive scheme and required them to set up

a prudent equity incentive structure, reasonably

decrease the senior managers’ remuneration level

and introduce appropriate incentive systems for

senior management and staff. Fourthly, the CBRC

further improved its market entry control on the

qualification of banks’ senior management, via

qualification reviews and qualification conversation

for the candidates. Fifthly, the CBRC urged foreign

banks to strengthen the responsibilities of the

board of directors within their locally incorporated

entities, and enhance their independence. The

CBRC has also strengthened oversight on foreign

banks’ related-party transactions, for the purpose

of effectively avoiding conflicts of interests with

their parent banks and shareholders. Lastly, the

CBRC guided the joint-stock reform of the CDB,

urged the CDB to establish and improve corporate

governance structure and gradually transform

from a policy bank to a commercial bank with the

establishment of modern operating procedures

and robust internal controls.

(2) Intensify banks’ internal control

In 2008, the CBRC continued its efforts in urging

banks to establish and optimize internal control

framework and pushing forward the transformation

to SBU-based banks. Firstly, the CBRC directed

banking institutions to accelerate SBU-based

restructuring. Banks have further improved their

institutional framework and business procedures

to achieve better efficiency and quality of bank

service. Secondly, the CBRC has provided

guidance for banking institutions to enhance

internal control mechanisms. Banks have been

urged to constantly nurture their compliance

culture, improve the internal control mechanism

including self-discipline and checks-and-balances.

Thirdly, the CBRC required stronger accountability

system. Through the enforcement of accountability

system, the critical role of board of directors

and senior managers in risk management could


Annual Report 2008

be highlighted so as to ensure effectiveness of

internal controls.

3. Supervision of credit risk(1) Effectively prevent cross-market risk contagions

In early 2008, the CBRC required commercial

banks to further prevent risks arising from cross-

sector business between the banking sector

and the capital market, identified illegal credit

funding to the stock market, and penalized the

rule-breaking institutions. Banks were strictly

forbidden to provide guarantee for corporate

bonds and client-based derivatives trading, thus

preventing financial risks from spreading from

the debt market and other markets to the credit

market. Moreover, the CBRC has improved

consolidated supervision of large commercial

banks and strengthened oversight of cross-

border and cross-sector risks.

(2) Enhance supervision of credit risk in key industries and areas

The CBRC has urged commercial banks to

optimize credit portfolio in compliance with

macroeconomic policies. The CBRC is also highly

alert to the adverse influence of policy shifts

on bank’s credit quality, and has intensified the

monitoring on the volume and migration of bad

loans. The CBRC also traced and analyzed the

trend of the risk profile on a monthly basis, and

carefully examined credit risk of each individual

industry.

In 2008, the CBRC put emphasis on overseeing

the growth of credit to the real estate sector.

Following the joint notice with PBOC, namely

the Notice on Strengthening the Management of the Credit Extension to Real Estate on Commercial Basis and the Supplementing

Notice on Strengthening the Management of the Credit Extension to Real Estate on Commercial Basis, the CBRC further adjusted

and fine-tuned policies on property development

loans and housing consumption loans. On

top of the more strict management of property

development loans, favorable terms were granted

to first home buyers, while the lending terms for

investment, real estate on commercial basis or

for the second home purchase were tightened as

the down payment and mortgage rate were raised

above the benchmark. Following these moves,

the CBRC issued the Notice of China Banking Regulatory Commission on Further Improving the Credit Risk Management in the Real Estate Industry, which articulated clear requirements to

commercial banks on the risk management of their

property loan business. The CBRC conducted on-

site examinations on default cases of some major

property developers, and identified the problem of

fake documents in some real estate transactions.

The CBRC also urged commercial banks to carry

out stress test specifically for property loan, and

to adopt risk control measures according to the

result, such as increasing loan loss reserves or

adjusting business plan and strategy.

(3) Tighten relevant credit policies

The CBRC required commercial banks to

implement strict policy for credit issuance, enforce

rigid process and procedures for loan review and

approval, reinforce compliance examination, and

prevent risks resulting from misconducts. Firstly,

banks were prohibited to provide “bundled loans”.

Secondly, the revolving of project loans was also

rigidly forbidden. Thirdly, banks should not grant

any forms of funding to manufacturing industry

projects before they obtain formal approvals from

relevant authorities. Last but not the least, banks

were strictly forbidden to securitize NPLs and

develop zero-return REITS.


(4) Intensify the monitoring on credit to group clients

The CBRC has repeatedly recognized commercial

banks to adjust client and asset structures to

optimize the allocation of funding resources.

Special focus has been on enhancing their

management of credit granting to group clients, for

the purpose of guarding against risk concentration.

At the same time, the CBRC has set strict cap for

concentration limit, namely maximum 10 percent

for a single client and maximum 15 percent for one

group client. It has also encouraged syndicated

lending or bond issuance to fund large corporate

client.

(5) Strengthen dynamic monitoring of credit default

The CBRC has further improved its system

for monitoring large NPLs. It has intensified

dynamic monitoring, analysis and control of NPLs’

occurrence, provisioning allocation, collection

and write-off. Meanwhile, measures have been

taken to improve credit default information

disclosure and sharing, broaden monitoring scope

of customer information, and realize information

sharing of local database and national database

for customer risk monitoring and risk warning

within the CBRC system.

(6) Improve NPL disposal and write-off

The CBRC has made a significant breakthrough

in propelling commercial banks to improve the

disposal of NPLs and the write-off of bad debt.

Commercial banks have been urged to proactively

deal with impaired assets by means of collection,

auction, or write-off, and to increase provision

coverage. In 2008, banking institutions made

significant progress in the write-off of bad loans

and build-up of stronger provisions.

In 2008, the ratio and stock of NPLs of banking

institutions realized double-decline. By the end

of 2008, the amount of commercial banks’ NPLs

was RMB560.3 billion, down by RMB708.2 billion

within one year; and the NPL ratio dropped to 2.4

percent, down by 3.75 percentage points during

the same period.

4. Supervision of market risk(1) Enhance the market risk management mechanism

Based on prudential regulatory principle, the

CBRC further encouraged banking institutions to

strengthen market risk management, improved

the analysis, reporting, contingency plans, and

management scheme for new products and

business with regard to market risk. Banks have

been required to clearly distinguish banking

account and trading account, have in place

effective measures and systems to identify,

measure, monitor and control market risk, increase

independent pricing capacity and improve market

risk management framework.

(2) Cope with turmoil in international financial markets

Due to the financial turmoil, interest rates and

exchange rates were extremely volatile and the

market environment has severely deteriorated. At


Annual Report 2008

the beginning of 2007 when the sub-prime crisis

emerged, the CBRC immediately established a

designated taskforce, and developed a monthly

monitoring scheme to analyze risks arising from

sub-prime investment. In 2008, the sub-prime

crisis evolved into a global financial crisis. The

“International Financial Turmoil Emergency Group”

was promptly founded by the CBRC to actively

lead and urge commercial banks to enhance risk

management and control.

In order to prevent risk contagions, the CBRC

has required commercial banks to improve

risk prevention awareness, and optimize risk

management for foreign currency assets and

liabilities. Firstly, a mark-to-market arrangement

dedicated to risk arising from foreign currency

assets was established to closely track market

movements. Secondly, commercial banks

were asked to pay close attention to losses in

trading with high-risk global banking institutions,

and adjust credit risk exposure to overseas

correspondent banks. Thirdly, portfolio structure

of foreign currency bonds should be adjusted with

proper timing. Fourthly, banks were encouraged to

actively protect asset by using legal methods. Last

but not the least, banks were required to timely,

truthfully and accurately disclose the performance

of client-based QDII business and the impact

of the turmoil on the operation and financial

positions, to guard against reputational risk.

5. Supervision of operational risk(1) Further improve the supervision of operational risk

In 2008, The CBRC issued the Guidance on Regulatory Capital Measurement for Commercial Bank’s Operational Risk, which

clarified the requirements on banks to calculate

capital for operational risk under the New Capital Accord, pressing commercial banks to improve

operational risk management and ensure sound

business operation.

(2) Make new progress in fraud prevention and control

In 2008, 309 fraud cases were discovered within

banking institutions, a reduction of 129 cases and

a decline of 29 percent compared with last year.

Among these cases, the number of large cases

involving a value of more than RMB1 million was

89, a reduction of 37 cases or 29 percent on a

year-on-year basis. The total value involved in

bank fraud cases was RMB1.07 billion, among

which large cases with value over 1 million

recorded an amount of RMB0.98 billion, down by

RMB0.75 billion and RMB0.72 billion respectively.

The average occurrence of bank frauds was

dropping close to a moderate level.

At the end of 2008, the CBRC established the

Bureau of Criminal Investigation (Bureau of

Banking Security), which is specialized in fraud

investigation, prevention and control, and security

management of the banking institutions (Box 16).


Box 16: The CBRC Bureau of criminal investigation (Bureau of banking security)

In 2008, the CBRC established the Bureau of criminal investigation (Bureau of banking security). By building up initial organization structure, defining department duties, formulating working system, and establishing coordination mechanism, the foundation has been laid for improving the continuous development of in-depth case inspection and prevention.

Bureau of criminal investigation (Bureau of banking security) is responsible for formulating the investigation rules of fraud cases at banks, organizing, coordinating and instructing the investigation of such cases, guiding and supervising the inspection and investigation of local offices, and instructing and inspecting the security protection work of banks.

1. Formulate the investigation rules of bank cases(1) Develop the on-site investigation (inspection) rules and procedures for bank cases;(2) Define the statistics investigation rules for bank cases;(3) Set the reporting, notification and communication rules for case prevention, and investigation;(4) Making out training policy for staff’s profession.

2. Organize, coordinate and instruct banking institutions’ case investigation (1) Organize and coordinate the investigation (inspection) of material cases;(2) Investigate (inspecte) cases together with other governmental authorities such as the public security, justice, disciplinary, supervision and national audit Agencies;(3) Guide and urge the self-investigation (self-inspection) of banks and the investigation (inspection) conducted by the CBRC local offices;(4) Overseeing the accountability on the people responsible for the cases.

3. Instruct and supervise banking institutions’ case inspection and prevention(1) Make overall arrangement and annual working plan of case prevention;(2) Supervise and urge banks to establish and strengthen the governing body and working policy of case inspection and prevention;(3) Guide and supervise case inspection and prevention;(4) Work out ways of assessment and provide banks with assessment comments on case inspection and prevention.

4. Instruct and inspect on the security protection work of banks(1) Together with public security authorities, working out the security protection system, formulate principles of emergency incidents and technical standard of security protection applicable to banks;(2) Urge and guide banks to in the establishment and reinforcement of security protection mechanisms, systems and security protection capability;(3) Push banks to support the detection and treatment of the cases conducted by governmental authorities of public security, justice, disciplinary supervision and national audit;(4) Together with public security authorities, inspect and instruct security protection conducted by banks;(5) Monitor rectification work of banks.


Annual Report 2008

(3) Promote IT risk supervision

Firstly, the CBRC has improved its regulations on IT

risks. In April 2008, the Notice of China Banking Regulatory Commission on Implementing the Provisional Rules Governing Contingency Management of Key Information Systems in the Banking System was issued, bringing IT risk into

the overall risk management framework of banks.

It clearly defined the emergency management

responsibility of the board, senior management, IT

risk management department, business department

and technology department of banks respectively

for technology risk incidents, and reinforced the risk

prevention, emergency response and safeguard

requirements to ensure the continuity of bank

operation and services.

Secondly, the CBRC launched the special

campaign of “Safeguarding Olympics” on bank

IT system, which included establishing the joint-

work mechanism with PBOC and CSRC for

emergency management. The CBRC arranged

specific self-checking programs on banks’ IT risk,

and piloted comprehensive inspection for banks’

key IT systems and devices. In addition, by taking

emergency response fire drill for the Beijing

Olympic Games, banks significantly improved their

own ability of emergency management. All systems

of banks operated in a stable and smooth manner

during the Beijing Olympic Games (Box 17).

Thirdly, the CBRC enhanced off-site surveillance

for IT risk. Tailoring to the features of IT risk, the

CBRC raised supervisory requirements by issuing

a series of 12 IT risk guidances.

Fourthly, the CBRC carried out IT risk on-

site examinations. In 2008, the CBRC adopted

the on-site examination procedures for IT risk

management and improved the inspection

criteria, standard and methods. On top of this,

a comprehensive inspection on banks’ IT risk

management was conducted by CBRC IT experts.

Lastly, the CBRC responded to the earthquake

promptly and helped restore banking services

to disaster-stricken areas. To ensure the safety

of banks operations in these areas, the CBRC

proactively instructed banks to use IT resources to

quickly collect information about the damage to the

branch offices and further guided them in the work

to relocate repair bank equipments. Furthermore,

the CBRC directed banks’ post- disaster recovery

work and secured business data and network.

Box 17: IT risk prevention efforts dedicated to ensuring the success of the Beijing Olympic Games

In order to ensure safe, continuous and robust operations of the IT system of banking institutions during the Beijing Olympic Games, the CBRC established a special team that actively urged banking institutions to conduct self-inspection, take corrective actions, standardize contingency management and carry out fire drills.

1. The CBRC conducted IT risk research in the six Olympic co-host cities as well as Guangdong and Shenzhen, acquired information on bank cards and overseas cards acceptance, latest e-banking and credit card fraud events and risk profile.

2. The CBRC required banking institutions to conduct a comprehensive testing on their data centers, back-


up centers, self-service banking facilities, key network infrastructures, and significant information systems. Meanwhile, the CBRC emphasized on self-assessment on the IT continuity plan, IT security, e-banking safety, secured physical environment for bank cards cashing, IT contingency systems, and stress-tests.

3. The CBRC specified duties of the board, senior management, IT risk management department, business and IT department in banks’ contingency management. With a focus on a comprehensive and effective contingency management through risk management, contingency response and support, it was made clear that information system should ensure business continuity. By jointly issuing the Notice of China Banking Regulatory Commission on Implementing the Guidance on Contingency Plans for the Information Systems Cross Banking and Securities Industries and the MOU on Emergence Response to Cross-sector IT Accidents between Banks and Securities Firms with CSRC. Emergency events were categorized and regulatory requirements on risk prevention, contingency plan, scenario analysis and on-going improvements were set out. 4. The CBRC organized fire drills in banking institutions. It released the Notice of China Banking Regulatory Commission on Drilling for Contingency in Key Information Systems by Banking Institutions During the Olympics, requiring banking institutions to conduct a special contingency drill on key information systems for the Beijing Olympic Games from May to June, with a focus on the safety of e-banking.

6. Supervision of liquidity risk(1) Require commercial banks to strengthen liquidity risk management

In 2008, the increasing volatility in the capital

markets, the real estate market, as well as the

impact of monetary policy resulted in a rapid

change of banking liquidity. The CBRC constantly

required commercial banks to strengthen liquidity

risk management. Firstly, commercial banks were

advised to raise liquidity risk awareness. Through

periodic economic situation briefings and off-

site surveillance reports, the CBRC promptly

informed banking institutions of overall bank

risk profile. It organized commercial banks to

conduct comprehensive training on liquidity risk

management, and implement stress-testing and

take preventive measures. Secondly, commercial

banks were encouraged to optimize their asset-

liability management. Through the review of

internal organizational structure for liquidity

management, banks were expected to clearly

divide responsibilities, streamline management

process, improve efficiency in fund clearing

and transfer, refine the risk monitoring system

and strengthen the liquidity risk management.


Annual Report 2008

Thirdly, banks were urged to strengthen liquidity

management in foreign currency, and maintain

adequate liquidity positions in foreign currency

reserves in order to survive market fluctuations.

(2) Develop contingency plan on liquidity risk

In response to the potential liquidity difficulties

which might occur to the parent bank of some

foreign banks and potential impact on their local

operations, the CBRC proposed a regulatory

plan including early-warning, reporting, risk

assessment, and emergency measures to deal

with emergencies, with a view to preventing and

managing liquidity risk of individual foreign bank in

a timely and effective manner, and safeguarding

sound operations of the banking sector.

7. Anti-illegal fund-raising activities

As required by the central government, the

CBRC acted as a leading agency in the joint-

ministry efforts to fight against illegal fund-raising

activities.

In 2008, the CBRC played an active role in

promoting the issuance of laws and policies

regarding anti-illegal fund-raising by legislative and

judicial bureaus. Based on in-depth research and

extensive solicitation of opinions, the CBRC led

the work in formulating the Provisional Working Procedure to Address the Illegal Fund-raising Activities, and compiled the Handbook to Address the Illegal Fund-raising Activities.

Meanwhile, the CBRC further promoted a joint-

ministry committee to tackle illegal fund-raising,

intensified supervision on prevention. On the

one hand, the CBRC focused on material cases

and took active and appropriate measures. On

the other hand, the CBRC conducted a series of

publicity and education campaigns to raise public

awareness of risk prevention.

In 2008, remarkable progress was made in

fighting against illegal fund-raising activities. A

few nation-wide material cases that involved a

huge amount of funds and significant number of

people were duly resolved. Serious complaints

were handled appropriately.

Left: On April 18, 2008, Chairman LIU Mingkang attended a video conference to brief on economic and financial development in the first quarter of 2008 and on financial service and security for the Beijing Olympic Games.

Right: On January 17, 2008, Disciplinary Commissioner WANG Huaqing chaired a meeting on fighting against illegal fund-raising activities.


1. Domestic regulatory coordination and information sharing(1) Intensify coordination within the CBRC

In 2008, the CBRC intensified coordination within

its national network. Through supervisor meetings,

seminars and regulatory letters of opinions, the

coordination among all levels of CBRC offices

was increased. Meanwhile, communications with

banking institutions and local governments was

also enhanced.

(2) Improve coordination with domestic government agencies on macroeconomic policies

In 2008, the CBRC worked closely with the

Ministry of Environmental Protection (MEP) to

support national energy-saving policies and

established a scheme for the green credit.

The CBRC also initiated a tentative program of

information exchange, share with MOLR and

completed technology plan for the program.

Following communications and consultations in

IV. Regulatory coordination and cooperation

the past year, supervisory cooperation between the

CBRC and SAT was launched. Besides, the CBRC

continued cooperation with NDRC, MOC, the

Bureau of Statistics and other ministries on national

macroeconomic policies and industrial policies.

(3) Strengthen regulatory coordination with other domestic regulators

In 2008, the CBRC continued to promote the

establishment of a cross-sector coordination

mechanism among financial regulators and

enhance information exchange and sharing. A

special IT network connection was established

with PBOC, which enhanced timeliness, integrity

and availability of data sharing. The CBRC

signed the MOU on Deepening Bank-Insurance Cooperation and Cross-sector Supervisory Cooperation with CIRC. The CBRC, jointly with

CSRC, released the Guidance of CBRC and CSRC on Contingency Plans for the Information Systems across Banking and Securities Industries, and carried out a joint on-site

examination on commercial banks as selling agent

for fund companies, which effectively bolstered

Left: In April 2008, the CBRC held the first senior banking supervisor seminar at University of Cambridge in the U.K..

Right: In April 2008, the CBRC held the second senior banking supervisor seminar at University of Cambridge in the U.K..


Annual Report 2008

supervisory cooperation between the banking

and the securities sector. In addition, the CBRC

also expanded the scope of information shared

with other government agencies, including on-

site examination reports, significant events and

regulatory reports to PBOC, and cross-sector

consolidated balance sheet information to CSRC

and CIRC.

2. Supervisory cooperation with overseas financial authorities(1) Improve bilateral supervisory cooperation relationship

By the end of 2008, the CBRC has signed bilateral

MOUs on supervisory cooperation or supervisory

cooperative agreements with overseas

counterparts in 33 countries and regions. In 2008,

the CBRC signed MOUs with the regulatory

authorities of Luxemburg, Vietnam, Belgium and

Ireland.

(2) Continue bilateral and multilateral regulatory meetings on a regular basis

In 2008, the CBRC successfully held the

3rd Sino-U.S. Banking Supervisors Bilateral

Conference, the 3rd Sino-Singapore annual

bilateral consultation, the 1st and 2nd Sino-Japan

Banking Supervisors Bilateral Conferences

and the 9th and 10th CBRC-HKMA bilateral

consultation. The CBRC also co-hosted the

3rd China- Japan-Korea Trilateral Supervisory

Meeting with its Japan and South Korean

counterparts (i.e. the first China- Japan-Korea

Trilateral Senior Financial Supervisor Meeting).

(3) Participate regional and international regulatory activities

The CBRC has maintained close contact with the

World Bank, the IMF, the Basel Committee on

Banking Supervision (BCBS), Executives' Meeting

of East Asia Pacific Central Banks (EMEAP)

and South East Asia, New Zealand, Australia

(SEANZA). The CBRC actively took part in the

banking supervisory working groups under the

Basel Committee, EMEAP and SEANZA.

In 2008, the CBRC was also actively engaged

in the Group of Twenty (G20) leaders meeting.

For the 2nd G20 summit, there are four working

groups established for strengthening prudential

oversight and transparency, reinforcing

international cooperation, promoting integrity

in financial markets and reforming international

banking institutions. These are aimed to provide

advisory services for decision-makers. In this

respect, the CBRC has been leading China’s

first working group and played a positive and

constructive role.

Left: On May 7, 2008, Chairman LIU Mingkang and Vice Chairman GUO Ligen met with the first batch of 8 selected staff who were assigned to Tibet and Qinghai offices under the staff exchange program.

Right: On December 6, 2008, the CBRC organized its 2nd nation-wide English Contest.


1. Optimal allocation on human resources(1) Standardize human resource management

The CBRC further strengthened key rules of

scientific human resource management, by

issuing the Opinions on Promoting Staff Exchange between CBRC Headquarters and Local Offices, and the Opinions on Competitive Selection of Staff etc. Measures

of staff performance were improved and human

resource management became more scientific,

standardized and efficient. The selection and

appointment of staff gained stronger credibility.

(2) Refine organizational structure for regulatory purposes

In order to optimize the allocation of regulatory

resources and push forward regulatory structure

reform, the CBRC established the Bureau of

V. Internal Management

criminal investigation to enhance functional

supervision. The CBRC also standardized

the governance at provincial and field offices,

rationalized duties and promoted supervisory

professionalism and effectiveness. Four grass-

root level supervisory agencies at Zhongwei,

Chongzuo, Laibing, Hezhou were transformed

to sub-branch field offices. Based on the post-

assessment of piloted lead supervisors and chief

examiners program in 2007, the Provisional Rules on the Management of Lead Supervisors and Chief Examiners of the China Banking Regulatory Commission was revised and the

preliminary training of lead supervisors and

chief examiners was completed. All these laid

a foundation for the posts competition in the

following year.

(3) Build up team and staff rotation

In 2008, aiming to improve leadership and

Box 18: The 6th International Advisory Council (IAC) Meeting

The 6th IAC Meeting was held on June 11 and 12, 2008 in Beijing, discussing on a wide range of topics, including reform and supervision of small and medium-sized rural financial institutions in China, the latest update in the implementation of the New Capital Accord in China, the stress tests on China’s banking industry by the CBRC and regulation on bank controlling shareholders. Representatives from Office of the Central Steering Group on Financial and Economic Affairs, Legislative Affairs Office of the State Council, MOF and PBOC as well as XIANG Junbo, president of the ABC and GAO Xiqing, CEO of the China Investment Corporation participated in some of the discussions. During the meeting, Vice Premier WANG Qishan met with the IAC members.


Annual Report 2008

supervisory capacity, the CBRC made steady

progress in human capacity building and

intensified job rotation and staff exchange. 13

Director-Generals were rotated to provincial

offices, and 14 new Director-Generals and Deputy

Director-Generals were promoted at provincial

offices. At the headquarter, 22 new Direction-

Generals or Deputy Director-Generals and 19

Directors or Deputy Directors were promoted.

Senior management turnover at the 9 banking

institutions directed by the CBRC were completed.

Staff exchange between eastern and western

CBRC offices was successful. For instance, 14

professional officers from Jiangsu, Zhejiang, and

Guangdong offices were appointed to offices in

the western part of China. Another 6 staff from the

CBRC headquarters and Beijing office were sent

to Qinghai and Tibet offices.

(4) Recruit talents

In 2008, in addition to the national recruitment

of civil servants, the CBRC improved its own

recruitment measures to meet supervisory

needs. 588 were hired at provincial CBRC offices

through the examinations of CBRC Specialized

Examination Committee. The CBRC human

resource structure was further optimized.

2. Staff training

In 2008, the CBRC moved forward with the

career design and training programs at all levels.

Two senior banking supervisor seminars were

successfully held at the University of Cambridge.

In total, 69 senior banking supervisors from

the CBRC headquarter and provincial offices

attended. 118 chief officers from sub-branch field

offices attended the joint-seminar by the CBRC

and HKMA. The CBRC also dispatched talented

staff to work with overseas institutions and to

gain more international experience. A total of 18

medium and senior level regulatory workshops

and English training classes were hosted with

1,950 staff being trained. The CBRC, for the first

time, organized an international training program

that attracted 30 senior staff from Malaysian and

Indian banking institutions. The CBRC completed

the “3-module” test system, developed more than

10 pieces of training courseware and 25,000 test

questions, and translated international regulatory

reference materials containing more than 350,000

words, all of which provided a good platform for

staff career training and self-study.

3. Cultural development

In 2008, the CBRC continued to foster a shared

supervisory vision and fine regulatory culture.

Several campaigns were launched to build up the

organizational culture by honoring model units

and individuals. A total of 18 work units and 100

individuals were awarded honorary titles. A topic

speech contest, “the Harmonious CBRC, a Warm

Family” was hosted.

4. Anti-corruption work

In 2008, the CBRC pressed ahead with anti-

corruption work in order to enhance internal

oversight and staff accountability and therefore

ensure its independence, effectiveness and purity.

(1) Internal oversight

The CBRC intensified internal oversight with a

focus on duty fulfillment and job accountability.

In 2008, 24 job accountability cases were

registered and 59 employees were enquired.

The assessment on compliance with the codes

of conduct was launched, which involved 675

local offices, with 648 hotlines set up and 6,671

evaluators employed throughout the whole

process. A total of 35,104 questionnaires were


24 percent4 percent2 percent

6 percent

7 percent1 percent

27 percent29 percent

Chart 10: 2008 budget funds allocation by project

Purchase of automobiles for supervision purposeInspections on cases IT construction

Large scale meetingsPurchase of office equipmentOffice rent Office repairExpenses on supervisory boards and other items

distributed and 1,461 pieces of advice were

collected, all of which were taken into account

of corrective measures.

(2) Inspections on clean party construction activities

In 2008, the CBRC headquarters inspected 13

provincial offices and one banking institution

directed by the CBRC. Provincial offices and

institutions directed by the CBRC sent out

230 inspection teams, held 4,656 individual

conversations, proposed 590 corrective opinions

and gave verbal warnings to 101 officers.

(3) Work ethic and self-discipline of senior officials

In 2008, heads of staff compliance departments

at all levels held talks with 2,535 responsible

persons of the offices at lower levels. The

CBRC organized some senior staff to make

job and integrity statements for 12,387 times

and 3,517 senior officials were interviewed

for integrity before taking office. 431 staff

were given verbal warnings and 158 were

enquired.

(4) Investigation of rule-breaking activities and complaint issues

In 2008, the CBRC made investigations on

5 rule-breaking cases and accepted 725

complaint letters and with a resolve ratio of

92.55 percent. A total of 569 cases involving

banking institutions were resolved.

(5) Rule enforcement inspection and internal audit

In 2008, the CBRC conducted 299 inspections

on rule enforcement activities, identified

1,779 problems and proposed 860 inspection

opinions and advisors, out of which 862

were taken by the inspected offices to make

rectification. In addition, the CBRC made 262

revisions to existing rules. In order to improve

internal audit, the CBRC conducted audits on

former responsible persons at 21 provincial offices

and one banking institution directed by CBRC,

and on 73 senior officers at field offices.

(6) Anti-commercial bribery work

In 2008, the CBRC released the Opinions on Promoting Market Integrity and the Guidance on Code of Standards for Bank Employees,

revised the Provisional Rules on Prohibiting Unfair Competition in the Banking Sector, and

cooperated actively with judicial departments

to address commercial bribery cases. In 2008,

a total of 37 cases in the banking industry were

handled.

5. Allocation of financial resources

Since its establishment, the CBRC has

continuously followed the guidance of "efficiently

using all administrative resources" to make sure

all budget funds was effectively allocated for the

daily operations of CBRC. In 2008, while ensuring


Annual Report 2008

the routine administration at all levels to be adequately funded, the CBRC tried to earmark a significant

portion of funding for the rebuilding of earthquake and snowstorm-stricken institutions, for financial

supervision in Beijing and other Olympic co-host cities. Meanwhile, the CBRC increased financial input on

criminal inspections and information technology.

The CBRC has strictly followed the Draft Rules on CBRC, CSRC and CIRC Financial Budget Management, established the cost accounting mechanism and budget performance appraisal system to

effectively use of all financial resources.

6. Staff service

In 2008, based on rules regarding government procurement by central government, the CBRC made

appropriate arrangement for fixed assets and office supplies procurement management. The CBRC’s

procurement strictly followed the Government Procurement Law and rules issued by the State Council.

7. Library

In 2008, the CBRC completed the

construction of a modern library

providing professional, timely

and open-source information.

The library is composed of a

reading room and an online

platform. Reading room has a

huge book collection covering

finance, economy, literature,

history, geography, philosophy

etc. and annual reports of

nearly 500 domestic and foreign

banks. Online platform contains

timely reference materials and

information from domestic and

foreign banks, accounting firms, and law firms. At present, the online library has 1,135,409 data entries and

a daily-update of 300 online platforms is accessible for all CBRC staff nation-wide. CBRC Library facilitates

the work and self-learning of staff, creates a nice study environment, and has saved up to 55 percent of

total subscription fees.


Documents

system and - zhuanti.cbrc.gov.cnzhuanti.cbrc.gov.cn/subject/subject/nianbao2008/english/4.pdf · I. Prudential legal and regulatory framework ... banking environment and banking institutions,