Original title: Chen Sheng: "Measures for the Supervision of the Behavior of Major Shareholders of Banking and Insurance Institutions (Trial)" Regulatory Context Sorting Out and Interpretation of Key Points
On October 14, 2021, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Measures for the Supervision of the Conduct of Major Shareholders of Banking and Insurance Institutions (Trial Implementation) (hereinafter referred to as the "Measures"), which precisely extends the object of supervision to the major shareholders of banking and insurance institutions, and puts forward regulatory requirements for the major shareholders of banking and insurance institutions from the dimensions of shareholding behavior, governance behavior, trading behavior, responsibility and obligation. This paper intends to analyze the regulatory context of the behavior of major shareholders and the regulatory focus of the behavior of major shareholders from the perspectives of "exploring the history of shareholder supervision" and "interpretation of the core points of the measures".
I. Exploration of the history of shareholder supervision
The Measures are the first time to clarify the concept of "major shareholders", and in the supervision type of shareholders of banking and insurance institutions, the type of supervision of major shareholders has been added, and the supervision requirements for the behavior of major shareholders have been strictly put forward.
(1) The type of shareholder supervision of banking and insurance institutions
In 2010, the China Insurance Regulatory Commission issued the Measures for the Administration of Equity of Insurance Companies, which was revised in 2014 and 2018 to divide insurance company shareholders into four categories: financial class I shareholders, financial class II shareholders, strategic shareholders, and controlling shareholders (shareholders who hold more than one-third of the equity of insurance companies, or whose capital contribution and voting rights of the shares they hold are sufficient to have a controlling impact on the resolutions of the shareholders (large) meeting of insurance companies), but in the chapter on shareholder behavior, there is no subdivided supervision for different types of shareholders. It mainly puts forward stricter regulatory requirements for controlling shareholders and controlling shareholders of insurance companies.
In 2012, in order to strengthen the governance supervision of insurance companies and standardize the behavior of controlling shareholders of insurance companies, the China Insurance Regulatory Commission issued the Measures for the Administration of Controlling Shareholders of Insurance Companies, which clarified that the controlling shareholders of insurance companies refer to shareholders whose capital contribution accounts for more than 50% of the total capital of insurance companies or whose shares account for more than 50% of the total share capital of insurance companies; although the amount of capital contribution or the proportion of shares held is less than 50%, the voting rights enjoyed by them according to their capital contribution or the shares they hold are sufficient to the shareholders' meeting. The resolutions of the General Meeting of Shareholders have a significant impact on the shareholders.
In 2013, the Notice of the China Banking Regulatory Commission on Strengthening the Administration of Equity Pledges of Commercial Banks (CBRC [2013] No. 43) (hereinafter referred to as "Circular 43") clarified that major shareholders refer to shareholders who can directly, indirectly, and jointly hold or control more than 5% of the shares or voting rights of commercial banks and have a significant impact on the decision-making of commercial banks. In 2018, the China Banking Regulatory Commission adopted the Interim Measures for the Equity Management of Commercial Banks, which aims to standardize the behavior of shareholders of commercial banks, especially major shareholders, and strengthen the equity management of commercial banks. It defines major shareholders as "shareholders who hold or control more than 5% of the shares or voting rights of commercial banks, or shareholders who hold less than 5% of the total number of shares but have a significant impact on the operation and management of commercial banks". In terms of shareholder responsibilities, major shareholders have higher explanation obligations and stricter regulatory requirements. Similarly, the Interim Measures for the Administration of Equity of Commercial Banks does not clearly define "major shareholder".
On 2 June 2021, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Code of Corporate Governance for Banking and Insurance Institutions, which puts forward regulatory requirements for major shareholders, clarifying that "major shareholders" refer to shareholders who hold or control more than 5% of the shares or voting rights of banking and insurance institutions, or hold less than 5% of the total capital or total shares but have a significant impact on the operation and management of banking and insurance institutions.
From the above regulatory documents, it can be seen that from the perspective of the supervision of shareholder behavior, the types of shareholder supervision of banking and insurance institutions are mainly controlling shareholders and major shareholders, and the promulgation of the Measures further refines the existing types of shareholder supervision.
(2) The history and background of the supervision of major shareholders
Although the above-mentioned measures for the supervision of banking and insurance institutions do not clarify the concept of "major shareholders", the regulatory authorities have actually mentioned the regulatory issue of the equity of major shareholders of banking and insurance institutions in many leadership speeches, reporter questions and answers, regulatory policies and normative documents. According to the author's search records on the official website of the China Banking and Insurance Regulatory Commission, there are as many as 62 regulatory trends and 31 regulations and normative documents related to major shareholders, and the author will briefly sort out the key points as follows:
1. Put forward overall requirements and establish a sense of prevention
In 2004, Tang Shuangning, then vice chairman of the China Banking Regulatory Commission, responded to a question from a reporter from the Financial Times of China, mentioning the need to prevent major shareholders from improperly controlling the bank, making the bank bear excessive risks, and causing infringement on the interests of other shareholders. Chairman Liu Mingkang stressed in his research in Sichuan in 2006 and at the work conference on the supervision of non-bank financial institutions in 2010 that non-bank financial institutions should effectively prevent the risk of related party transactions of major shareholders and prevent them from becoming financing tools for major shareholders. In 2015, the CBRC issued the Guiding Opinions on Promoting the Development of Private Banks, which requires that the responsibilities of shareholders and compliance responsibilities be clarified on the governance of private banks, and major shareholders must not interfere with the normal operation of private banks by virtue of their status.
2. Pay attention to shareholder issues and strengthen regulatory attitudes
In February 2017, Chen Wenhui, vice chairman of the China Insurance Regulatory Commission, pointed out at the special training meeting on the use of insurance funds to implement the spirit of the National Insurance Regulatory Work Conference, and the corporate governance of individual institutions is useless in the current field of insurance fund utilization, and there is a lack of effective checks and balances on major shareholders. In April 2017, the China Insurance Regulatory Commission (CIRC) issued the Notice on Strengthening Insurance Supervision to Combat Violations of Laws and Regulations and Rectify Market Chaos, which focuses on the supervision of shareholders' equity, focusing on rectifying the false capital contribution behavior of shareholders of insurance companies and the situation of "one word" of the company's major shareholders or actual controllers, so as to improve the effectiveness of the governance mechanism.
By the second half of 2017, the CIRC held a special training course on the study and implementation of the spirit of the National Financial Work Conference on the Insurance Industry, and the regulatory attitude was clearer and clearer, pointing out from the three angles of corporate governance of insurance institutions, the protection attributes of insurance products, and the use of insurance funds that "resolutely prevent the phenomenon of manipulation by major shareholders", "must not let insurance products become financing tools for a small number of people", and "insurance funds must not become tools for major shareholders to invest and control." A month later, when Vice Chairman Chen Wenhui delivered a speech on the use of insurance funds, he also stressed that insurance funds should not be made into an investment holding tool for major shareholders and that it is necessary to deeply reflect on the aggressive operation and aggressive investment of a small number of insurance institutions in the past period.
3. Improve institutional support to prevent equity chaos
In January 2018, the China Banking Regulatory Commission issued the Interim Measures for the Equity Management of Commercial Banks. In March, the China Insurance Regulatory Commission revised and issued the Measures for the Administration of Equity in Insurance Companies, which emphasizes the effective prevention of major shareholders interfering in the operation and management of commercial banks in violation of regulations, and effectively preventing major shareholders from abusing their rights and improperly conveying benefits.
In November 2019, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Measures for the Evaluation of Corporate Governance Supervision of Banking and Insurance Institutions (for Trial Implementation), which judges, evaluates and classifies the corporate governance level and risk status of banking and insurance institutions from the aspects of party leadership, shareholder governance, board governance, board of directors governance, board of supervisors and senior management governance, risk internal control, related party transaction governance, market constraints, and governance of other stakeholders, and implements classified supervision according to law based on the assessment results.
4. Coordinate governance plans and make breakthroughs in key regulatory priorities
Since 2020, the CbRC has repeatedly pointed out clearly that there are chaos such as manipulation by major shareholders, illegal interference in the operation of companies, and insider control at the press conference of the new office of the State Council and the answers of press spokesmen to reporters, and it is necessary to focus on strengthening the supervision of the behavior of major shareholders and the supervision of related party transactions. The entities that clearly need to be regulated include small and medium-sized financial institutions, insurance institutions, trust companies, joint-stock banks and other financial institutions.
In May 2020, the head of the relevant department of the China Banking and Insurance Regulatory Commission summarized the progress of the governance of shareholder equity chaos in banking and insurance institutions in response to reporters' questions, emphasizing that the Banking and Insurance Regulatory Commission continued to improve the effectiveness of corporate governance of banking and insurance institutions, followed up on the formulation of institutional norms such as guidelines for the supervision of the behavior of major shareholders, and accelerated the establishment of regulatory mechanisms such as centralized custody of equity and disclosure of shareholders in major violations of laws and regulations.
In August 2020, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Three-Year Action Plan for Improving Corporate Governance in the Banking and Insurance Industry (2020-2022), which is problem-oriented, adheres to categorical policies, and comprehensively promotes the corporate governance of banking and insurance institutions. Among them, standardizing the behavior of shareholders is an important part of improving the quality and efficiency of corporate governance. It also clarified the objectives of the three-year action plan: in 2020, we will further rectify the chaos of equity and related party transactions, and at the same time focus on improving the behavior constraint mechanism of major shareholders. In 2021, we will focus on improving the protection mechanism for the rights and interests of small and medium-sized shareholders and promoting the rectification of shareholder equity stock problems. In 2022, we will further explore and improve the shareholder governance mechanism of banking and insurance institutions. Combined with the special rectification of equity and related party transactions in recent years, some effective practices have been solidified into systems.
In January 2021, the China Banking and Insurance Regulatory Commission (CBIRC) issued the "Overall Situation of the Results of the 2020 Corporate Governance Supervision and Evaluation of Banking and Insurance Institutions", which clearly pointed out the typical problems found in shareholder governance: major shareholders use financial institutions as their "cash machines"; some institutions have untrue funds invested in shares. Some banks provide shareholders with equity funds through the bank's credit business; major shareholders illegally manipulate institutional operations, and actually empty the "three associations and one layer". Some institutions, especially small and medium-sized institutions, have opaque and irregular equity relations, and shareholder behavior is not compliant and prudent.
In February 2021, in response to the corporate governance of non-banking institutions, the CBRC pointed out that in recent years, four types of non-banking institutions, such as financial leasing companies, enterprise group financial companies, auto finance companies, and consumer finance companies, have governance problems of non-compliant and imprudent shareholder behavior, such as the problem of monopoly of a single share, the abuse of the position of a major shareholder by shareholders, illegal interference in the operation and management of institutions, and the participation of shareholders in non-banking institutions with non-own funds, and the capital is untrue.
On March 19, 2021, the Life Insurance Supervision Department of the China Banking and Insurance Regulatory Commission issued the Circular on the Results of the 2020 Corporate Governance Supervision and Evaluation of Life Insurance Companies, focusing on the problem of shareholders' equity violations: First, there are problems such as hiding the actual controller, concealing the related relationship, and holding the equity on behalf of the shareholders. Second, the proportion of shareholders' equity pledge is too high. Third, investors use non-owned funds to contribute capital. Fourth, the major shareholders directly intervene in the operation and management of the company.
In March 2021, the China Banking and Insurance Regulatory Commission issued a document entitled "The Banking and Insurance Regulatory Commission Completes the Three-Year Investigation and Rectification of the Equity of Rural Small and Medium-sized Banks to Promote the Consolidation of Corporate Governance and Enhance the Effectiveness of The Solid Foundation", summarizing the results of the regulatory authorities in cleaning up and rectifying the chaos of the equity of shareholders of rural small and medium-sized banks in the past three years, rectifying problems, cleaning up shareholders, and punishing institutions. In April 2021, the China Banking and Insurance Regulatory Commission (CBIRC) issued a document entitled "The CBRC Continues to Carry Out Special Rectification of Equity and Related Party Transactions of Banking and Insurance Institutions to Continuously Improve the Quality and Effectiveness of Corporate Governance", summarizing the results of special governance: In 2019, focusing on small and medium-sized institutions, comprehensively investigate prominent problems and risks. In 2020, we will consolidate the results of the previous rectification, carry out special rectification "looking back", cover more than 4,600 banking and insurance institutions, investigate the violations of laws and regulations of "untrue capital and untrue shareholders", and resolutely crack down on illegal acts of misappropriation, arbitrage and embezzlement of bank insurance funds. In the next step, the CBRC will promote the normalization of the special rectification work of shareholders' equity, focus on the key issues of key institutions, and formulate and issue important regulatory regulations for corporate governance such as corporate governance guidelines for banking and insurance institutions, guidelines for the supervision of the conduct of major shareholders, management measures for related party transactions, and measures for the evaluation of directors and supervisors' performance of duties.
On June 7, 2021, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Notice on Carrying Out the "Year of Internal Control and Compliance Management Construction" in the Banking and Insurance Industry, which focuses on the key points of the "Year of Internal Control and Compliance Management Construction" in the banking and insurance industry and the improvement of the governance structure of internal control compliance, the first thing to emphasize is to standardize the behavior of major shareholders and prevent major shareholders from interfering in the operation and management activities of banking and insurance institutions beyond their authority.
(3) The supervision ideas and characteristics of major shareholders
From the above combing, it can be found that the regulatory thinking on the behavior of major shareholders presents the following characteristics:
1. Violations by major shareholders are widespread, and the target of supervision is comprehensively expanded
Whether it is a national joint-stock commercial bank, a city commercial bank, a rural commercial bank, a private bank, an insurance company or a non-bank financial institution, there are hidden dangers in the behavior of major shareholders, and in order to strengthen the corporate governance supervision of banking and insurance institutions and protect the legitimate rights and interests of banking and insurance institutions and stakeholders, it is necessary to regulate the behavior of major shareholders as a whole.
2. Extensively and comprehensively investigate problems, rectify special projects and improve rules
On the basis of the establishment of the system, we will first comprehensively investigate the problems to ensure a wide coverage, and then for the chaos that needs to be curbed, we will carry out special rectification, quickly break through key problems, and at the same time establish a demonstration effect, and then continuously improve the rules by checking loopholes and explore effective governance mechanisms.
3. Overall planning of the overall program, step by step implementation
For the common problems in the banking and insurance industry, on the basis of overall planning, a step-by-step plan is formed and implemented item by item, from the establishment of the system to the improvement of the corporate governance supervision system of the banking and insurance industry.
The promulgation of this measure also clearly reflects the above-mentioned CBIRC's determination to govern the behavior of shareholders of banking and insurance institutions and to strengthen regulatory norms.
Second, the interpretation of the core points
(1) Expand the scope of application
Article 2 of the Measures stipulates the scope of application: "These Measures apply to large state-controlled commercial banks, national joint-stock commercial banks, urban commercial banks, rural commercial banks, foreign-funded corporate banks, private banks, insurance group (holding) companies, insurance companies, insurance asset management companies, trust companies, financial asset management companies, financial leasing companies, consumer finance companies and auto finance companies (hereinafter collectively referred to as banking and insurance institutions) established in accordance with the law within the territory of the People's Republic of China. "Compared with the Corporate Governance Code for Banking and Insurance Institutions, which clearly defines banking and insurance institutions as "large state-owned commercial banks, national joint-stock commercial banks, urban commercial banks, private banks, rural commercial banks, foreign-funded banks, insurance group (holding) companies, property insurance companies, reinsurance companies, and life insurance companies" in the Code of Corporate Governance of Banking and Insurance Institutions, the definition of banking and insurance institutions in the Measures is extended to insurance asset management companies, trust companies, financial asset management companies, financial leasing companies, Non-bank financial institutions such as consumer finance companies and auto finance companies.
From the above section on the history and background of the supervision of major shareholders, it can be seen that the regulatory authorities have long been concerned about the governance of non-bank financial institutions in which shareholders behave in a non-compliant and imprudent manner. In the list of three batches of shareholders with major violations of laws and regulations published by the China Banking and Insurance Regulatory Commission, auto finance companies have also been involved (for example, China Zhengtong Automobile Service Holdings Co., Ltd. has been established wholesale through improper means to establish Shanghai Dongzheng Auto Finance Co., Ltd., and it and its affiliates have carried out related party transactions with Orthodox Financial in violation of regulations), financial leasing companies (during the period when China Economic International New Technology Company held China Financial Leasing Company, it illegally carried out related party transactions and sought improper benefits), Trust companies (Sichuan Trust Co., Ltd. used part of the inherent loans or trust funds for violations of the relevant shareholders and their related parties, and the shareholders Sichuan Hongda (Group) Co., Ltd., Sichuan Hongda Co., Ltd., and Sichuan Haoji Food Group Co., Ltd. were included in the list of shareholders who violated major violations of laws and regulations). The expansion of the scope of application of the measures is obviously a summary of regulatory practices, and the violations of major shareholders are widespread, and it is necessary to regulate them as a whole.
(2) Clarify the definition of major shareholders
As mentioned above, the terms used by major shareholders have appeared many times in policy regulatory documents and answering reporters' questions, but the Measures are the first time to clarify the definition of major shareholders. The major shareholders of various types of banking and insurance institutions are determined through six situations in three ways: shareholding ratio, actual control impact, and regulatory determination.
1. Shareholding ratio
Scenario 1: "Holding more than 15% of the equity of large state-controlled commercial banks, national joint-stock commercial banks, foreign-funded corporate banks, private banks, insurance institutions, financial asset management companies, financial leasing companies, consumer finance companies and auto finance companies". For insurance institutions, non-banking institutions, and banks other than urban commercial banks and rural commercial banks, 15% is used as the criterion for defining major shareholders.
Situation 2: "Holding more than 10% of the equity of urban commercial banks, rural commercial banks and other institutions". For urban commercial banks and rural commercial banks, the shareholding ratio requirements have been reduced.
2. Actual control of the impact
Scenario 3: "The person who actually holds the largest number of shares in the banking and insurance institution and holds not less than 5% of the shares (including shareholders with the same number of shares)".
Scenario 4: "Nominate two or more directors".
Situation 5: "The board of directors of the banking and insurance institution believes that it has a controlling impact on the operation and management of the banking and insurance institution".
The above three situations are defined as major shareholders from the perspective of actual control influence. However, in the case of situation 5, where there is a dispute, the board of directors of a banking and insurance institution believes that the criteria for a controlling impact on the operation and management of the banking and insurance institution are difficult to clarify.
3. Circumstances of regulatory determination
Situation 6: "Other circumstances determined by the China Banking and Insurance Regulatory Commission (hereinafter referred to as the CBIRC) or its branch agencies". Other circumstances may be used as a catch-all clause to reserve room for subsequent supervision.
In addition, the shareholding ratio of shareholders, their related parties and concerted actors is calculated on a consolidated basis. If the total shareholding ratio meets the above requirements, the relevant shareholders shall be regarded as the major shareholders.
(3) Control the shareholding behavior of major shareholders
In terms of shareholding behavior, the Measures mainly put forward a number of specific requirements for major shareholders from the dimensions of shareholding funds and equity relationship.
In terms of shareholding funds: "The major shareholders of banking and insurance institutions shall use their own funds from legal sources to invest in banking and insurance institutions, and may not use entrusted funds, debt funds and other non-self-owned funds to enter the shares, unless otherwise provided by laws and regulations." This point is also the basic requirement of the Interim Measures for the Equity Management of Commercial Banks, the Measures for the Administration of Equity of Insurance Companies, and the Code of Corporate Governance of Banking and Insurance Institutions. In terms of the corresponding regulatory model, compared with the requirements of the Interim Measures for the Equity Management of Commercial Banks to make written commitments when major shareholders take a stake in a commercial bank, the Measures stipulate strict procedures for major shareholders to invest in funds: obtain the approval and filing of the equity times regulatory authority, and at the same time, the source of funds should be specified, in addition to the regulatory review of the source of funds. Previously, the three batches of major violations of the shareholders' lists published by the Banking and Insurance Regulatory Commission included violations of laws and regulations, including "the funds invested in the shares do not meet the regulatory regulations", so the issue of the source of the funds invested in the shares has always been the focus of supervision.
In terms of equity management: First, it emphasizes the penetrating review of shareholder qualifications, vertically requiring major shareholders to explain the equity structure until the final actual controller and beneficiary, and horizontally requiring the relationship between them and other shareholders or acting in concert. This is consistent with the requirements of the Interim Measures for the Administration of Equity of Commercial Banks, the Measures for the Administration of Equity of Insurance Companies, and the Code of Corporate Governance of Banking and Insurance Institutions. However, "it is strictly forbidden to conceal the actual controller, conceal the related relationship, hold the equity on behalf of the person, private agreement and other violations of laws and regulations." Compared with the above-mentioned measures, this statement fully reflects the strict requirements for the authenticity and transparency of the equity relationship of major shareholders, and is also a system response to the fact that some major shareholders design complex hidden equity structures, evade supervision, and manipulate banking and insurance institutions behind the scenes.
Second, cross-shareholding is prohibited, and there must be no direct or indirect cross-shareholding between the major shareholders of banking and insurance institutions and banking and insurance institutions. The regulatory provisions here are consistent with the spirit of Article 14 of the Interim Measures for the Administration of Equity of Commercial Banks: "The number of commercial banks in which the same investor, its related parties and concerted actors participate as major shareholders shall not exceed 2, or the number of holding commercial banks shall not exceed 1." It is also a further reiteration of the provisions in the Measures for the Administration of Controlling Shareholders of Insurance Companies that "the controlling shareholders of an insurance company shall not accept the investment and shareholding of insurance companies controlled by the insurance company and the subsidiaries controlled by the insurance company". Avoid shareholders indirectly controlling multiple institutions through shareholdings in affiliated enterprises.
"When the number of shares pledged by the major shareholders of the banking and insurance institutions exceeds 50% of the number of shares held by them, the major shareholders and their nominated directors shall not exercise their voting rights at the shareholders' (general) meetings and the board of directors." Regarding the issue of equity pledge of banking and insurance institutions, in 2013, the CBRC issued Circular No. 43, requiring commercial banks to clarify the relevant provisions of equity pledge management in their articles of association, including that "if the balance of borrowings by shareholders in the Bank exceeds the net value of the bank's equity held in the previous year, they shall not pledge the equity of the Bank." "When a shareholder pledges the number of shares of the Bank to reach or exceed 50% of the shares held by the Bank, the voting rights of the shareholders at the shareholders' meeting and the directors assigned to the board of directors shall be restricted. etc. The Interim Measures for the Administration of Equity of Commercial Banks also stipulate that regulators may restrict the relevant rights of shareholders of commercial banks to participate in operation and management when they pledge their shares in violation of the law. From this, it can also be seen that the current supervision is becoming increasingly strict for the management of equity pledges of commercial banks in order to prevent and control various risks caused by bank equity pledges.
(4) Regulate governance conduct
First, improper intervention is strictly prohibited. Major shareholders shall maintain the independent operation of banking and insurance institutions, respect the business decisions of the board of directors and management, properly exercise shareholder rights in accordance with laws and regulations, and strictly prohibit improper interference or restrictions on banking and insurance institutions. A typical case is Baoshang Bank, and Zhou Xuedong, head of the takeover team of Baoshang Bank, wrote that the major shareholders of Baoshang Bank manipulated the shareholders' meeting, interfered in the normal operation of the bank, and conveyed interests through a large number of improper related party transactions, capital guarantees and capital occupation, infringing on the interests of the bank. Previously, the Measures for the Administration of Controlling Shareholders of Insurance Companies prohibited improper interference by controlling shareholders. The Interim Measures for the Equity Management of Commercial Banks and the Code of Corporate Governance for Banking and Insurance Institutions stipulate the obligations of major shareholders, shareholders and their controlling shareholders and actual controllers not to abuse their rights and not to interfere in business management decisions. The Measures further clarify the eight specific circumstances in which major shareholders are not allowed to interfere, as well as one of the "other forms of interference in the independent operation of banking and insurance institutions". The eight specific situations cover institutional decision-making, personnel decision-making, business decision-making, capital decision-making, business decision-making, loan or guarantee decision-making, etc., and are also institutional responses to regulatory practice.
The second is to prudently nominate and manage directors. The board of directors is in a core position in the corporate governance structure, the selection, management and supervision of directors are also crucial, and the reason for the risk of some banking and insurance institutions is that the risk control and control functions of directors and boards of directors are ineffective, and even they have become a tool for the transmission of the interests of major shareholders. The Measures emphasize the responsibility of major shareholders for nominated directors. The major shareholders of banking and insurance institutions "shall prudently exercise the right to nominate directors of banking and insurance institutions" and "shall strengthen the supervision of the performance of duties by directors and supervisors nominated by them in accordance with the law, and promptly adjust those who cannot effectively perform their duties in accordance with laws and regulations, the provisions of the charter of banking and insurance institutions and regulatory requirements." That is to say, compared with other non-major shareholders nominating directors, the directors nominated by major shareholders are subject to dual supervision and management.
Third, in principle, it is not allowed to hold concurrently. In principle, the major shareholders of banking and insurance institutions and the staff of their groups shall not concurrently serve as senior managers of banking and insurance institutions. Except for wholly-owned banking and insurance institutions, banking and insurance institutions identified by regulatory authorities as being in the risk disposal and recovery period, and financial enterprises whose major shareholders are central management.
(5) Managing related party transactions of major shareholders
The Measures stipulate eight specific prohibited acts in related party transactions and one bottom-up clause to strictly prevent the transmission of benefits.
The second is to prudently control the number and scale of related party transactions. It is strictly forbidden to circumvent the review of related party transactions by concealing related party relationships, splitting transactions, nesting transactions, lengthening the financing chain, etc.
The third is the dynamic management of related party transactions, and the major shareholders have the obligation to cooperate with banking and insurance institutions to carry out the dynamic management of related party transactions, timely count the accumulated amount of related party transactions, monitor whether they meet the relevant provisions on the concentration of related party transactions, regularly provide the banking and insurance institutions with the overall situation of related party transactions, and take corresponding measures in a timely manner according to the early warning prompts of bank insurance institutions.
Connected transactions are also an important dimension of regulatory concern. Zhou Xuedong, the leader of the group, pointed out in the article "The financial risks of small and medium-sized banks mainly stem from corporate governance failures - the key to the corporate governance of small and medium-sized banks from the takeover of Baoshang Bank": "Since 2005, tomorrow's group has conveyed benefits through a large number of improper related party transactions, capital guarantees and capital occupation, and Baoshang Bank has been gradually "hollowed out", causing serious financial and operational risks and directly infringing on the interests of other shareholders and depositors. In the list of three batches of shareholders with major violations of laws and regulations published by the Banking and Insurance Regulatory Commission, the violations of laws and regulations by shareholders also involve "illegal related party transactions and seeking improper benefits".
(6) Clarify the responsibilities and obligations of major shareholders
The responsibility and obligation of major shareholders is to cooperate with supervision, including cooperating with risk disposal, cooperating with inspection and investigation, and performing information reporting obligations in strict accordance with regulatory regulations. The second is to maintain banking and insurance institutions, including doing a good job in reputation risk management, strengthening the risk isolation between their banking and insurance institutions and non-licensed financial institutions, doing a good job of capital planning, capital replenishment preparation, and balancing profit distribution and capital replenishment. The third is to coordinate with other shareholders, support and encourage all shareholders, and must not obstruct or instruct banking and insurance institutions to obstruct small and medium-sized shareholders from participating in the shareholders' meeting, or set up other obstacles.
(7) Consolidate the responsibilities of banking and insurance institutions
In addition to the requirements for the major shareholders of banking and insurance institutions, Chapter VI of the Measures also stipulates the management responsibilities of banking and insurance institutions themselves, the ultimate responsibility for the equity management of banking and insurance institutions is the board of directors of the company, the chairman of the board is the first responsible person, and the secretary of the board of directors is the directly responsible person, and the responsibility for equity management is fully implemented through compaction responsibility. In terms of specific strategies, banking and insurance institutions are required to pay attention to the behavior of major shareholders, establish a risk isolation mechanism, establish a major shareholder information file, and evaluate the relevant situation of major shareholders at least once a year, and at the same time encourage banking and insurance institutions to formulate a list of rights and obligations of major shareholders and a list of negative behaviors, and effectively supervise and guide the behavior of major shareholders by clarifying the rights and responsibilities of shareholders, shareholder violations, legal responsibilities and regulatory penalties.
In terms of liability, the Measures make it clear that if a major shareholder abuses his rights, the banking and insurance institution shall require the major shareholder to bear the liability for compensation in accordance with Article 20 of the Company Law.
(8) Supervision and management clarify supervision and management measures
Where the major shareholders of a banking and insurance institution violate the provisions of these Measures, the CBRC and its dispatched institutions may, first, take regulatory measures, order them to make corrections within a time limit, and, as appropriate, interview the major shareholders and relevant personnel, publicly inquire, publicly reprimand, and notify their superior competent units. Second, in the case that the shareholding funds and equity relationship violate the provisions of the Measures, and there is improper interference or restriction of the banking and insurance institution, the regulator may restrict the shareholders' (general) meeting and other related shareholder rights such as the right to request, voting rights, nomination rights, proposal rights, and disposal rights. Third, in the case of serious damage to the interests of banking and insurance institutions, if the capital adequacy ratio or solvency is endangered, the regulator may take urgent measures to restrict or prohibit the development of related party transactions.
In recent years, the major shareholders of some financial institutions have interfered in the operation of the company in violation of the law and illegal related party transactions, resulting in frequent risks. The Measures put forward regulatory requirements for the major shareholders of bancassurance institutions from the dimensions of shareholding behavior, governance behavior, trading behavior, responsibility and obligation, which is conducive to consolidating the main responsibilities of relevant financial institutions and relevant shareholders. Combined with the regulatory thinking and the current regulatory situation, it is expected that the regulator will continue to investigate and rectify the equity of shareholders who violate laws and regulations, and the second is to check and fill in the gaps on the basis of finding problems, and improve various regulatory rules to further standardize shareholder behavior and strengthen the corporate governance supervision of financial institutions.
