Bank of China calls for corporate governance reform

by Richard Kilner

Story link: Bank of China calls for corporate governance reform

The Bank of China has called for reform of the internal systems and corporate governance structure of the Chinese banking sector.

Although the rising superpower’s financial sector did not show the defects of the West, nor suffer the same degree of loss, in the recent financial crisis, the Bank of China has called for reformation.

Chinese banks have essentially copied the Western model of corporate governance, but in the wake of the financial crisis, where big name institutions that were formerly considered beacons of excellence imploded, there are now calls for a change.

The Bank of China has attributed much of the blame to boards of directors, which failed to make the correct longterm decisions and were poor judges when it came to risks and exposure.

In addition, a culture of short-termism without any emphasis on longterm profitability and sustainability has been blamed on boards.

By contrast, the Bank of China has asserted that Chinese banks, which the State has a stake in, are more interested in social responsibility and sustainability.

The institution has called for a refinement of corporate governance in China, learning the lessons of the financial crisis and appointing independent directors.

Elsewhere in the world, Angela Knight (CEO of the British Banking Association) has warned against kneejerk reforms to banking regulation by either the UK or EU, fearing harsh regulations could lead to an exodus of talent.