More regulation of rural banks' shareholder equity
China is stepping up the investigation and regulation of shareholder equity for small and medium-sized rural banks to improve their corporate governance, said an official of the China Banking and Insurance Regulatory Commission on Monday.
From 2018 to 2020, the CBIRC's offices at the local level will investigate all rural commercial banks, rural cooperatives and rural credit unions.
As of the end of last year, the regulators had investigated 868 rural cooperatives, which involve 28,000 stakeholders with shareholding of more than 1 percent, and 65,000 shareholder affiliates. The rest of the rural banking institutions will be investigated in 2019 and 2020.
The regulators found that small and medium-sized rural banks had a few prominent shareholder equity problems, according to the CBIRC.
Some rural banking institutions lacked control over related party transactions and even transferred benefits through abusive related party transactions. Some institutions had management irregularities in pledges of equity. Some stakeholders bought shares by breaking fundraising rules, faking qualifications or entrusting a third party to hold the equity. Some shareholders sought control over rural banking institutions' operations through invisible association and even instigated the institutions to issue loans to them and refused to repay.
The regulators will strengthen areas of institutional weakness by increasing supervision of the shareholders of rural banking institutions, making detailed rules on shareholders' related party transactions, and pushing forward with equity trust, in addition to urging the rectification of problems, imposing severe punishment, and enhancing corporate governance capabilities of such institutions, said an official of the CBIRC.
