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China demands 'loyalty' from bank directors

Thursday 6 January 2011 - by Will Henley

Commercial bank directors based in China have been told they must apply new rules of "loyalty and diligence", under a decree from the country's top bank regulator.

The order is designed to improve corporate governance of commercial banks and protect investor rights, according to a release published on the Chinese Banking Regulatory Commission's website on Thursday.

Under the decree, commercial bank directors are expected to formulate new performance appraisal rules and set up a record system for making annual assessments of staff performance. The banks' rules, process and evaluation results will in turn be regulated by the CBRC.

"Focusing on two key aspects, loyalty and diligence, the guidance clearly defines significant issues, such as the scope, requirement and process of directors' duties at commercial banks," the statement says, adding: "Directors should be compliant, professional and efficient."

The guidance provides separate requirements for executive, non-executive and independent directors.


It continues: "The implementation of the guidance will contribute to the effective regulation on monitoring directors' performance, strengthening directors' capability of conducting their duties, and improving the board's decision making process."


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