MNI POLICY: China Banks Should Improve Corporate Governance

     BEIJING (MNI) - China's financial institutions should improve their

corporate governance to adapt to a more complex and open financial system, Guo

Shuqing, chairman of the China Banking and Insurance Regulatory Commission wrote

in an article published by the Economic Daily on Friday.

     Across China, financial institutions are not yet fully in line with global

governance standards, which include equal rights and responsibilities,

compatible incentives and constraints and strict risk control, according to Guo.

     For small and medium-sized banks, insurance and trust companies, the worst

case is internal control, with manipulation by large shareholders and

administrative interventions commonly seen, Guo added.

     To promote corporate governance, financial regulators should work with

local governments to reform city and rural commercial banks as well as rural

credit cooperatives, he added.

     --REFORMS

     Reducing the shareholdings of large investors and increasing capital and

shares, so to introduce strategic shareholders with strong capital strength and

rich management experience to focus on long-term development should all be

included, Guo said, noting other actions should be reformed.

     Guo also said that state-owned banks and insurance companies should

integrate leadership of the Communist Party of China into all aspects of

corporate governance. For private or foreign-controlled banks and insurers, it

is also necessary to establish party branches, he added

     Deepening the reform of small and medium-sized financial institutions will

inevitably involve many mergers and acquisitions, but private capital will

remain dominant in the industry, Guo said

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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