Regulators release 22-point document to enhance governance of financial institutions

Four Chinese financial regulators have jointly rolled out a document containing 22 targeted measures to improve the governance of financial institutions.

Per the document, China will basically put a desired governance framework for financial institutions in place by 2029. The framework will feature clear delineation of power and boundaries of responsibility, compatible incentive and restraint mechanisms, rigorous risk management, and standardized, efficient operation. It will substantially strengthen the inherent stability and risk resistance capacity of the financial system, and lift the quality and efficiency of financial services serving high-quality development.

The guidelines ask to curb illegal meddling by major shareholders and insider control, and strengthen look-through supervision over equity holdings and connected transactions. They also call for optimizing board composition, imposing stricter accountability on key personnel — including board directors and senior executives — refining incentive and restraint mechanisms, and beefing up internal control and compliance systems.

The guidelines also urge stronger and refined financial oversight. Regulators will conduct tiered and categorized differentiated supervision, impose severe penalties to raise the cost of illegal and irregular conduct, and upgrade risk monitoring and early warning systems to make regulation more targeted, effective, and forward-looking, according to the document.

The document was jointly released by the National Financial Regulatory Administration, the People's Bank of China, the China Securities Regulatory Commission, and the Ministry of Finance.