New disclosure rules on commercial banks in PRC

Provisional Rules on Information Disclosure of Commercial Banks

With effect from 21 May 2002 commercial banks in China (including domestic commercial banks, wholly foreign funded banks, joint venture banks and branches of foreign banks) are required to disclose financial statements, information on risk management, corporate governance and major events of the year according to the Provisional Rules on Information Disclosure of Commercial Banks (Rules) promulgated by the People's Bank of China. Further, they must publish their annual reports within four months after the end of their financial years.

Information to be disclosed

1. Financial statements

(a) accounting report including balance sheet, statement of income (profit and loss account), statement of shareholders' equity and other additional charts;

(b) annex and notes to accounting report are required to cover policy of accounting and accounting estimates, contingent items and post-balance sheet items, transfer and sale of important assets, total volume of related party transactions and major related party transactions (being those with trading volume exceeding RMB 30 million or 1% of total net assets of the commercial bank concerned), a detailed breakdown of key categories in the accounting report, and status of capital adequacy;

(c) auditing report provided by the appointed accounting firms; and

(d) description of financial position covering the general performance of the commercial bank concerned, generation and distribution of profit and other events that have substantial impact on the bank's financial position and performance.

2. Information on risks and risk management

(a) credit risk: status of credit risk management, credit exposure, credit quality and earnings;

(b) liquidity risk: status of liquidity, factors affecting liquidity and strategy on liquidity management;

(c) market risk: risks brought by changes of interest rates and exchange rate on the market, impacts of such changes on profitability and financial positions of the bank and strategy of market risk management;

(d) operation risk: risks brought by flaws and mistakes of internal procedures, staff and system or by external shocks and the integrity, rationality and effectiveness of their internal control mechanism; and

(e) other risks that may have severe negative impact on the bank.

3. Information on Corporate Governance:

(a) shareholders meetings during the year;

(b) members of the board of directors and its work performance;

(c) members of the board of supervisors and its work performance;

(d) members of the senior management and their profiles; and

(e) layout of branches and function departments;

(f) major events of the year including: (i) names of the ten biggest shareholders and changes during the year; ii) increase or decrease of registered capital, splitting up and merger; and (iii) other important information that is necessary for the general public to know.

Banks with total assets of less than RMB 1 billion or deposits of less than RMB 400 million are exempt from the Rules. However they are encouraged to comply with the Rules on a voluntary basis.

City commercial banks need to comply with the Rules from 1 January 2003 to 1 January 2006.

For more information on the new disclosure requirements, please contact Luke Filei at [email protected] or +86 21 628 96363.