On July 31, the National Financial Regulatory Administration, the People's Bank of China, the China Securities Regulatory Commission, and the Ministry of Finance jointly issued the Implementation Opinions on Improving the Governance of Financial Institutions. This document aims to accelerate the establishment of a modern financial enterprise system with Chinese characteristics, continuously enhance the governance of financial institutions, and promote high-quality financial development.
The Implementation Opinions systematically propose 22 targeted measures across nine sections, covering areas such as strengthening Party leadership, improving shareholder governance, enhancing the operational effectiveness of governance bodies, reinforcing internal governance, and strengthening and improving supervision to build a sound financial ecosystem.
The document sets a target for 2029, by which time a governance mechanism for financial institutions should be largely formed, characterized by clear boundaries of rights and responsibilities, aligned incentive and constraint mechanisms, strict risk management, and standardized and efficient operations. This is expected to significantly enhance the internal stability and risk resilience of the financial system, and markedly improve the quality and efficiency of financial services supporting high-quality development.
A key focus is establishing a post-event recovery mechanism for risk responsibilities. The Implementation Opinions prioritize upholding and strengthening the Party's overall leadership, emphasizing the organic integration of Party leadership with corporate governance. It requires state-owned financial institutions to strictly implement core requirements such as incorporating Party-building into their articles of association, practicing "two-way entry and cross-appointment," and ensuring Party committees or groups conduct pre-discussion and research on major operational and management matters. The goal is to fully leverage the Party committee's leadership role in setting direction, managing the overall situation, and ensuring implementation.
Simultaneously, the document calls for unswervingly advancing full and strict Party governance, resolutely dismantling the "exception theory," "elite theory," and "special theory" within the financial sector. It aims to rigorously investigate corruption issues such as "relying on finance to feed off finance," "relying on regulation to feed off regulation," and the corruption behind financial risks, continuously purifying the industry's political ecosystem.
Regarding the improvement of shareholder governance, the Implementation Opinions directly address industry pain points by proposing strict control over shareholder entry standards and building a "firewall" between industrial capital and financial capital. It explicitly prohibits enterprises with illegal cross-industry operations, excessively high leverage, or serious credit defaults, as well as individuals with such records, from becoming major shareholders or actual controllers of financial institutions. Regulatory authorities are required to conduct look-through identification of major shareholders, actual controllers, and beneficial owners, strictly preventing false capital contributions, circular capital injections, and capital withdrawals.
Furthermore, the document strictly regulates shareholder behavior, prohibiting the abuse of shareholder rights or illegal interference in the management and operation of financial institutions. It also bans financial institutions from transferring benefits to shareholders and their related parties. To protect the rights of minority investors, the Implementation Opinions clearly propose the establishment of mechanisms for recovering improper gains from shareholders and a post-event recovery mechanism for risk responsibilities, safeguarding minority shareholders' rights to information, participation in decision-making, and supervision over major matters.
To ensure efficient operation of governance mechanisms, the Implementation Opinions provide detailed arrangements for enhancing the operational effectiveness of governance bodies and strengthening internal governance. In terms of optimizing board structure, it requires a reasonable limit on the proportion of directors nominated by the same shareholder and its related parties on the board, based on the institution's positioning and equity structure. It particularly emphasizes improving the effectiveness of independent directors, advocating for them to constitute a majority and serve as conveners in specialized committees such as audit, nomination, remuneration and assessment, and related-party transactions, thereby preventing major shareholders and insiders from illegally interfering in the selection of independent directors.
On strengthening internal governance and incentive-constraint mechanisms, the Implementation Opinions guide financial institutions to balance functionality and profitability. Internal performance assessments must balance income and risk, focusing on long-term cycles to prevent excessive short-term incentives. It strictly implements the deferred payment and clawback systems for performance-based compensation of senior management and key personnel, optimizes the compensation distribution structure, and increases the tilt towards the frontline grassroots staff. The document also promotes sustainable development by requiring financial institutions to leverage their unique characteristics and advantages to effectively serve the "five major areas": technology finance, green finance, inclusive finance, pension finance, and digital finance. It encourages financial institutions to actively adopt environmental, social, and governance concepts and disclose relevant reports to the public. Furthermore, it encourages financial institutions and their employees to actively participate in social welfare and charitable activities, contributing more to society.
In terms of strengthening and improving supervision, the Implementation Opinions require a risk-oriented approach, implementing differentiated supervision based on classification and grading. Following the principle of substance over form, it mandates look-through supervision of shareholder equity and related-party transactions. At the same time, it seeks to enhance the forward-looking and intelligent nature of supervision, strengthen monitoring and early warning of corporate governance risks, unify data standards, and promote digital and intelligent supervision. This aims to achieve early identification, early warning, early exposure, and early disposal of risks.