How to evaluate whether the senior executives of urban commercial banks and private banks are competent in performing their duties? What are the penalties for executives who fail to perform their duties? Recently, the Fujian Supervision Bureau of the State Administration of Financial Supervision issued the Measures for the Evaluation of the Performance of Senior Managers of Private Banks in Urban Commercial Banks in the Jurisdiction (Trial) (hereinafter referred to as the "Measures"), which clarified the corresponding evaluation methods and regulatory requirements. The Measures shall come into force on the date of issuance.
The "Measures" clarify the five evaluation dimensions of performance of senior management personnel of urban commercial banks and private banks: performance of duty of loyalty, duty of diligence, professionalism, independence and moral standards, and compliance, and three evaluation levels of competence, basic competence and incompetence, nine categories of situations that shall not be rated as competent and eleven categories of situations that should be rated as incompetent. Corresponding regulatory requirements are put forward for senior managers whose performance evaluation results are basically competent and incompetent.
Industry insiders told the Financial Times that the "Corporate Governance Guidelines for Banking and Insurance Institutions" issued by the former China Banking and Insurance Regulatory Commission in 2021 also requires that banking and insurance institutions should establish and improve the performance evaluation system for directors, supervisors and senior managers, and carry out performance evaluation of directors, supervisors and senior managers. The issuance of the Measures is conducive to strengthening the continuous supervision of senior managers of local urban commercial banks and private banks in Fujian, promoting the improvement of the quality and efficiency of performing duties, and promoting the high-quality development of urban commercial banks and private banks.
It is worth noting that since the first batch of five private banks were piloted in 2014, private banks have gone through a decade of development. As of the end of 2023, there are still 19 private banks operating in mainland China, and there is only one private bank under the jurisdiction of the Fujian Regulatory Bureau, Fujian Huatong Bank.
Clarify five evaluation dimensions and eleven types of behavior "red lines"
The Measures specify that the performance evaluation shall include at least five dimensions: performance of the duty of loyalty, performance of the duty of diligence, professionalism of the performance of the performance, independence and ethical standards of the performance of the performance, and compliance of the performance of the performance. The performance evaluation results are divided into three levels: competent, basically competent, and incompetent.
At the same time, the Measures specify 11 categories of conduct that should be rated as incompetent:
First, it operates in violation of laws and regulations, and the circumstances are more serious or the amount of losses caused is relatively large;
Second, the internal management and control system is not sound or the implementation and supervision are not effective, resulting in a large amount of losses or triggering a large number of financial crime cases;
(3) violating the rules of prudent operation, causing a relatively large amount of losses or triggering a large financial crime case;
Fourth, failing to provide statements, reports and other documents or materials to the regulatory authorities in accordance with regulations, refusing to make corrections after being prompted in writing by the regulatory authorities, or providing false statements, reports and other documents or materials to the regulatory authorities or concealing important facts;
Fifth, financial fraud and data fraud are serious;
Sixth, failing to disclose information in accordance with regulations, refusing to make corrections after being prompted in writing by the regulatory authorities, or disclosing false information, harming the legitimate rights and interests of depositors and other customers;
Seventh, refusing, obstructing, or resisting lawful supervision, where the circumstances are more serious;
Eighth, after the occurrence of a major crime case or a major emergency, failing to report or report the case in a timely manner, failing to take appropriate measures to control losses in a timely manner, and not actively cooperating with the relevant departments in investigating and handling the case or handling the emergency;
9. Failing to take action in accordance with the requirements of the regulatory authorities during the period of suspension of business for rectification, takeover, or reorganization, or illegally transferring or transferring property or creating other rights over property;
10. Failure to perform the safety production management duties stipulated in the "Work Safety Law of the People's Republic of China", resulting in production safety accidents;
11. Other serious dereliction of duty as determined by the regulatory authorities.
Executives who are incompetent will be removed and held accountable
So, what are the penalties for executives who are basically competent and incompetent in their evaluations?
According to the Measures, the board of supervisors of the legal person city commercial bank and private bank in the jurisdiction shall put forward work suggestions or handling opinions based on the review results of the regulatory authorities, timely feedback the evaluation results and relevant opinions and suggestions to the senior management, and formally notify the senior management in writing. The evaluation results and relevant opinions and suggestions of branch-level senior management shall be notified in writing by the head office or authorized branches.
Among them, for senior managers whose evaluation results are basically competent, they shall organize a conversation, put forward a request for improvement within a time limit to the senior managers themselves, and take accountability measures for the performance of their duties as appropriate. City commercial banks and private banks shall provide necessary assistance and support for relevant senior managers to improve their performance of their duties.
The senior management personnel who are incompetent in the evaluation results should be held accountable, and the senior management personnel may resign from their posts on their own initiative, or be dismissed by city commercial banks and private banks in accordance with relevant procedures and reported to the regulatory authorities. Where senior managers perform their duties in violation of laws and regulations and cause losses to urban commercial banks or private banks, they shall recover compensation. Where senior managers are suspected of committing a crime, they shall promptly transfer it to the judicial organs.
The Board of Directors shall be responsible for the conversation and accountability of the senior management of the head office, and the senior management of the head office or the designated department shall be responsible for the conversation and accountability of the senior management at the branch level.
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