In recent years, many Chinese banks rushed to go public. Despite many benefits from the process, effective corporate governance still remains the most important, while listing is only the first step of banking reforms, said Guo Tianyong with the Chinese version of Financial Times.

Up to now, there have been 11 listed banks, including State-owned ones like the Industrial and Commercial Bank of China and China Construction Bank, as well as share-holding banks such as China Merchants Bank and China Minsheng Banking Corporation.

The Agricultural Bank of China initiated its stock holding reform, and local commercial banks in Beijing, Shanghai and Nanjing are also preparing for initial public offerings (IPOs). This is a trend that will continue for some time.

Guo said that Chinese banks want to go public for the following reasons: Collect more funds to meet the capital adequacy ratio requirement; raise profile of bank's brand and make the financial institution more transparent; establish a modern enterprise system through the IPO process; and forge an effective corporate management and internal control system.

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Through the IPOs, these banks have collected a lot of money. And senior management is wondering how to spend this extra money. Almost simultaneously, several large banks sought to expand overseas - without too much consideration. Meanwhile, the banks give an impression that they are well formatted and strictly audited with their annual reports, making people feel that the banks have reached a new level of transparency, he added.

IPOs have also improved and reformed the management structure within Chinese banks, from directors and supervisory boards to the management team. However, questions remain on whether these management changes can truly be effective, particularly when temporary high-level shuffles frequently occurr in listed banks, and severe crimes, like corruption and bribery in local branches continue. Even senior Chinese regulatory officials admit that these Chinese listed banks are getting closer to international standards on a superficial level.

Going public can benefit Chinese banks in many ways, but establishing an effective corporate management system is the most important goal. Premier Wen Jiabao used to describe Chinese banking reforms as "You have to pay if you want management reforms."

For Chinese banks, it's a short time period between shareholder reforms and applying for an IPO. But systemic problems regarding bank operations and management systems are difficult to overcome. Those who think getting an IPO will erase all these obstacles are only dreaming. It is only the first step in reforming the banking system, according to Guo.

In Western banks, there are two major streams: independent director system, and supervisory board system. The former was derived from the United States and Britain, where an external body supervises bank management. And the latter comes from Germany and Japan, where they oversee day-to-day operations.

In general, these two modes do not coexist within one bank. But in China, these two, together with the Communist Party Committee system, will coexist for a long time. One wonders if this multiple supervision system will hamper a bank's efficiency. But it is possible these supervisory bodies and systems can work together.

While these dramatic reforms are taking place within the headquarters of listed banks, their local branches aren't changing much. Some branch staff don't even care about IPOs. Which is why banks should reform all aspects of their business, from top to bottom.

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