CBRC Strengthened Regulations on Shareholders of Commercial Bank

Xiao Yao

Private capital has been enthusiastic in setting up or acquiring banking institutions in the past years. Meanwhile， plenty of problems arose， acquisitions of bank shares with non-proprietary funds or using entrustment structure， the illegal transfer of interests between a bank and its shareholder.

In January， 2018， China Banking Regulatory Commission （CBRC） released the Interim Measures for the Administration of Equity in Commercial Banks （“the Measures”） to prevent and punish illegal acts of shareholders that harm the interests of banks and to ensure the sound operation and healthy development of commercial banks.

I. Definition of major shareholders

The Measures defines a major shareholder （the “Major Shareholder”） as the one who holds more than 5% shares or voting rights of a commercial bank， or having a significant influence on the operation and management of a commercial bank even though its shares is less than 5%. “Significant influence” mainly refers to the power to appoint directors， supervisors or senior management of a commercial bank， to affect the financial and management decisions of a commercial bank through agreement or other means or such other situations as identified by CBRC.

II. Requirements and restrictions on major shareholders

The Measures put forward several requirements for the Major Shareholder， including：

The Major Shareholder shall explain the shareholding structures to the commercial bank and the supervisory authority and disclose its actual controller， the ultimate beneficiary， and its relationship with the other shareholders or parties acting in concert.

1.The Measures stipulates that a Major Shareholder could only hold shares in no more than two banks， whether directly or through its related parties or parties acting in concert， and should not control more than one commercial bank， unless otherwise authorized by the State Council， provided by laws and regulations or approved by CBRC.

2.The Major Shareholder should not sell its shares in a bank within five years from the date of acquiring the shares unless otherwise approved by the CBRC.

3.The Measures requires the Major Shareholder to assume the responsibility of capital replenishment. The Major Shareholder is required to sign a commitment to supply additional capital to the commercial bank when necessary and report its capital replenishment ability to the CBRC on an annual basis through the commercial bank.

III. Responsibility of the board of commercial bank to examine the qualifications of shareholders

In addition to information disclosure by the Major Shareholder， the Measures also requires a bank to examine its shareholders qualifications， and recording any changes to its Major Shareholders and their respective ultimate controller or beneficiary or related parties or parties acting in concert.

The board of a commercial bank shall evaluate the qualification of a Major Shareholder， its performance of capital commitments or other obligations under its articles of association or other documents and the compliance of the laws， regulations. This evaluation shall be conducted at least once a year and shall be submitted to CBRC.

IV. Restrictions on affiliated-party credit

Further to the single borrowers credit limit of 10% of a banks capital balance stipulated in the Law on Commercial Banks， the Measures provides that the aggregate credit balance given by a bank to a Major Shareholder and controlling shareholders， actual controllers， related parties， parties acting in concert and ultimate beneficiaries shall not exceed 15 percent of the net capital of the bank. Moreover， the bank should confirm the ultimate obligor of the credit in accordance with the principle of transparency， to prevent the shell company to circumvent the limit of credit concentration.

V. Acquisition of bank shares using fund of financial products

With the further opening up of financial markets in China， there are many diversified financial products and financial institutions being strong. A series of regulatory rules have been promulgated recently by regulatory authorities including the Interim Measures for the Management of Equity in Commercial Banks， which show the effort of Chinese regulators in improving the financial regulatory framework and preventing systemic financial risks.

【作者簡(jiǎn)介】肖瑤（1995.8.19- ），漢族，吉林松原人，現(xiàn)為中國(guó)政法大學(xué)學(xué)生，法學(xué)與工商管理雙專業(yè)。