CHINA BANKING REGULATORY COMMISSION 2010 Annual Report 中国银行业监督管理委员会 China Banking Regulatory Commission
BRO CHINA BANKING REGULATORY COMMISSION Annual Report 2010
CHINA BANKING REGULATORY COMMISSION Annual Report 2010
中国银行业监督管委员会 Annual Report 2010 Chairman's Statement n About the CBRC Our Mandate, Objectives & Missions Our Philosophy, Approach Criteria 10 Organizational Structure 16 Part One Economic Banking Developments 2 Macroeconomic and financial environment lL. Latest developments of Chinas banking industry Part Two Banking Reform Opening-up 31 . Latest developments in Chinas banking reform I Latest developments in the opening-up of the banking sector Il. Financial innovation and regulation Part Three Implementation of Macroeconomic Adjustment Policies I. Adjusting the pace of credit supply Il. Participating in national policy formulation IV boosting the weak sector Part Four Prudential Supervision 53 llL. Credit risk V Operational and fraud risk supervision V. Liquidity risk supervisio 61 IX. Credit guarantee activities X. Anti-illegal fund-raising
2 Annual Report 2010 Chairman’s Statement 6 About the CBRC 10 Our Mandate, Objectives & Missions 10 Our Philosophy, Approach & Criteria 10 Code of conduct 11 Management 12 Chief Advisor 14 Foreign IAC Members 15 Organizational Structure 16 Part One Economic & Banking Developments 21 I. Macroeconomic and financial environment 22 II. Latest developments of China’s banking industry 26 Part Two Banking Reform & Opening-up 31 I. Latest developments in China’s banking reform 32 II. Latest developments in the opening-up of the banking sector 37 III. Financial innovation and regulation 40 Part Three Implementation of Macroeconomic Adjustment Policies 43 I. Adjusting the pace of credit supply 44 II. Supporting economic restructuring and industrial upgrading 44 III. Participating in national policy formulation 46 IV. Boosting the weak sectors 47 Part Four Prudential Supervision 53 I. Corporate governance supervision 54 II. Internal controls supervision 54 III. Credit risk supervision 56 IV. Market risk supervision 59 V. Operational and fraud risk supervision 59 VI. Liquidity risk supervision 61 VII. Country risk supervision 62 VIII. Reputational risk supervision 62 IX. Credit guarantee activities 63 X. Anti-illegal fund-raising 63 Table of contents Table of contents
Part Five Improvement of Prudential Supervision Development of prudential supervisory framework Thematic Column 1: Progress in building up international macro-prudential supervisory framework ll Enforced implementation of Three Rules and One Guidelines IV Assessment and enhancement of supervisory effectiveness Thematic Column 2: Effectiveness assessment of licensing, off-site surveillance and on site examination V Supervisory cooperation and coordination VI. Construction of supervisory capacity Part Six Depositor and Financial Consumer Protection and Education 93 1. Protection of depositors and financial consumers lL. Public financial education Part Seven Information Disclosure and Market Discipline Government information disclosure and regulatory transparency IL Information disclosure of the banking sector ll. Improvement of accounting system 101 Part Eight Fulfillment of Social Responsibility 105 1. Participating in standard setting IL Facilitating the World Expo Shanghai and the Guangzhou Asian Games ll. Supporting disaster relief and post-disaster reconstruction 107 IV. Advancing the"Financial Knowledge to Countryside"campaign and assisting employment of young people Part Nine outlook I Macroeconomic environment and major risks faced 113 Il. Medium-to-long term banking supervision strategies and outlook Part Ten Appendix 119 Appendix 1: Responsibility Description of the CBrC Departments and Local Offices 120 Appendix 2: Financial management activities of the CBrC Appendix 3: Rules and regulatory documents issued in 2010 Appendix 4: Rules and regulatory documents revoked or inapplicable Appendix 5: MOUs and EOLs with overseas regulators Appendix 6: Significant Regulatory and Supervisory Events in 2010 Appendix 7: Terminology
3 Part Five Improvement of Prudential Supervision 65 I. Development of prudential supervisory framework 66 Thematic Column 1: Progress in building up international macro-prudential supervisory framework 68 II. Development of regulatory framework 71 III. Enforced implementation of Three Rules and One Guidelines 72 IV. Assessment and enhancement of supervisory effectiveness 73 Thematic Column 2: Effectiveness assessment of licensing, off-site surveillance and on-site examination 74 V. Supervisory cooperation and coordination 83 VI. Construction of supervisory capacity 87 Part Six Depositor and Financial Consumer Protection and Education 93 I. Protection of depositors and financial consumers 94 II. Public financial education 95 Part Seven Information Disclosure and Market Discipline 99 I. Government information disclosure and regulatory transparency 100 II. Information disclosure of the banking sector 101 III. Improvement of accounting system 101 Part Eight Fulfillment of Social Responsibility 105 I. Participating in standard setting 106 II. Facilitating the World Expo Shanghai and the Guangzhou Asian Games 107 III. Supporting disaster relief and post-disaster reconstruction 107 IV. Advancing the “Financial Knowledge to Countryside” campaign and assisting employment of young people 109 Part Nine Outlook 111 I. Macroeconomic environment and major risks faced 112 II. Supervisory focus of 2011 113 III. Medium-to-long term banking supervision strategies and outlook 115 Part Ten Appendix 119 Appendix 1: Responsibility Description of the CBRC Departments and Local Offices 120 Appendix 2: Financial management activities of the CBRC 125 Appendix 3: Rules and regulatory documents issued in 2010 126 Appendix 4: Rules and regulatory documents revoked or inapplicable 131 Appendix 5: MOUs and EOLs with overseas regulators 138 Appendix 6: Significant Regulatory and Supervisory Events in 2010 140 Appendix 7: Terminology 150 Table of contents
中行业监督管题委员金 Annual Report 2010 Appendix 8: Statistics Appendix 8-1: Total assets of banking institutions (2003-2010) D Appendix 8-2: Total liabilities of banking institutions(2003-2010) Appendix 8-3: Total owner's equity of banking institutions (2003-2010 Appendix 8-4: Total deposits and loans of banking institutions (2003-2010) 5: Profit after tax of banking institutions(2007-2010) N Appen o-D. Returns of banking institutions(2007-2010) D Appendix 8-7: NPLs of banking institutions(2010) Appendix 8-8: Liquidity ratio of banking institutions (2007-201 Appendix 8-9: NPLS, Asset impairment provisions and Provisioning coverage ratio of 159 commercial banks (2007-2010) Appendix 8-10: NPLs of commercial banks(2010) 16 Appendix 8-11: Distribution of NPls of commercial banks by industry(2010) 161 Appendix 8-12: Distribution of NPls of commercial banks by region(2010) Appendix 8-13: Capital adequacy ratio of commercial banks(2010) Appendix 8-14: CBRC on-site examinations(2003-2010) 163 Appendix 8-15: Number of legal entities and staff of the banking institutions (As of end-2010 Indices on Boxes, Figures and Table Box 1: Targeted supervisory measures adopted by the CBrc Box 2: International Banking and Financial Regulatory Reform Box 3: Chinas banking sector maintained sound and stable operations 349 Box 4: Strategic transformation of China's banking sector Box 5: Joint stock reform of the abc 33 Box 6: Continuous development of new-type rural financial institutions Box 7: Consumer finance companies opened for business Box 8: Participation of private capital in Chinabanking sector 36 Box 9: Local incorporation of foreign banks in China Box 10: Measures to mitigate cross-border risk Box 11: Reflections on financial innovation Box 12: Efforts to support energy saving, emissions reduction and elimination of obsolete capacity Box 13: Efforts to support economic development in western China Box 14: Promotion of small enterprise finance Box 15: Recent global reforms of corporate governance supervision 55 Box 16: International initiatives to enhance the"shadow"banking supervision Box 17: Supervising the market risk of financial leasing companies Box 18: Cracking down on credit card-related crime
4 Annual Report 2010 Appendix 8: Statistics Appendix 8-1: Total assets of banking institutions (2003-2010) 152 Appendix 8-2: Total liabilities of banking institutions (2003-2010) 153 Appendix 8-3: Total owner's equity of banking institutions (2003-2010) 154 Appendix 8-4: Total deposits and loans of banking institutions (2003-2010) 155 Appendix 8-5: Profit after tax of banking institutions (2007-2010) 156 Appendix 8-6: Returns of banking institutions (2007-2010) 157 Appendix 8-7: NPLs of banking institutions (2010) 158 Appendix 8-8: Liquidity ratio of banking institutions (2007-2010) 158 Appendix 8-9: NPLs, Asset impairment provisions and Provisioning coverage ratio of 159 commercial banks (2007-2010) Appendix 8-10: NPLs of commercial banks (2010) 160 Appendix 8-11: Distribution of NPLs of commercial banks by industry (2010) 161 Appendix 8-12: Distribution of NPLs of commercial banks by region (2010) 162 Appendix 8-13: Capital adequacy ratio of commercial banks (2010) 163 Appendix 8-14: CBRC on-site examinations (2003-2010) 163 Appendix 8-15: Number of legal entities and staff of the banking institutions (As of end-2010) 164 Indices on Boxes, Figures and Tables Box 1: Targeted supervisory measures adopted by the CBRC 23 Box 2: International Banking and Financial Regulatory Reform 24 Box 3: China’s banking sector maintained sound and stable operations 29 Box 4: Strategic transformation of China’s banking sector 32 Box 5: Joint stock reform of the ABC 33 Box 6: Continuous development of new-type rural financial institutions 34 Box 7: Consumer finance companies opened for business 35 Box 8: Participation of private capital in China’ banking sector 36 Box 9: Local incorporation of foreign banks in China 39 Box 10: Measures to mitigate cross-border risks 39 Box 11: Reflections on financial innovation 41 Box 12: Efforts to support energy saving, emissions reduction and elimination of obsolete capacity 45 Box 13: Efforts to support economic development in western China 46 Box 14: Promotion of small enterprise finance 50 Box 15: Recent global reforms of corporate governance supervision 55 Box 16: International initiatives to enhance the “shadow” banking supervision 58 Box 17: Supervising the market risk of financial leasing companies 59 Box 18: Cracking down on credit card-related crime 60 Table of contents Table of contents
Box 19: International and domestic initiatives to strengthen liquidity risk supervision Box 20: Progress in implementation of Three Rules and One Guidelines Box 21: Stress testing Box 22: Summary of key on-site examinations in 2010 Box 23: Consolidated supervision Box 24: Bank branching cross-strait Box 25: Implementation of the Supplementary Agreement Vll to the CEPA Box 26: The Supervisory College of the bOc BOx 27: Participation in the FSAP Box 28: The Eighth IAC Meeting Box 29: Rolling out the"Excel in Performance"campaign Box 30: E-government building at the CBrC Box 31: The CBRC's measures to protect depositors and financial consumers Box 32: 2010 Chinas Banking Public Education Day Box 33: International initiatives on financial consumer protection 9 Box 34: Reform and convergence of international accounting standards 102 Box 35: Guidance on Social Responsibility Box 36: The CBRC's social responsibility performance 109 Chart Chart 1: Total assets and liabilities of banking institutions (2003-2010) Chart 2: Market Share(by assets)of banking institutions(2003-2010 Chart 3: Deposits, loans loan-to-deposit ratio(2003-2010) Chart 4: Numbers and percentage of banks meeting the CAr requirement(2003-2010) 27 Chart 5: NPL balance and ratio of commercial banks (2007-2010) Chart 6: Asset impairment provisions and provisioning coverage ratio of commercial banks (2007-2010) Chart 7: Income structure of banking institutions(2010 Chart 8: Liquidity condition of banking institutions( December 2009 to December 2010) 28 Chart 9: Monthly average loan growth of banking institutions and the annualized GDP quarterly growth Chart 10: Map of banking service coverage(2009-2010) Chart 11: 2010 budget allocation by project Table Table 1: Foreign banking establishments in China(As of end-2010 Table 2: Foreign bank operations in China(2004-2010)
5 Box 19: International and domestic initiatives to strengthen liquidity risk supervision 61 Box 20: Progress in implementation of Three Rules and One Guidelines 72 Box 21: Stress testing 79 Box 22: Summary of key on-site examinations in 2010 81 Box 23: Consolidated supervision 82 Box 24: Bank branching cross-strait 85 Box 25: Implementation of the Supplementary Agreement VII to the CEPA 85 Box 26: The Supervisory College of the BOC 85 Box 27: Participation in the FSAP 86 Box 28: The Eighth IAC Meeting 86 Box 29: Rolling out the “Excel in Performance” campaign 89 Box 30: E-government building at the CBRC 90 Box 31: The CBRC’s measures to protect depositors and financial consumers 94 Box 32: 2010 China’s Banking Public Education Day 96 Box 33: International initiatives on financial consumer protection 97 Box 34: Reform and convergence of international accounting standards 102 Box 35: Guidance on Social Responsibility 106 Box 36: The CBRC’s social responsibility performance 109 Chart Chart 1: Total assets and liabilities of banking institutions (2003-2010) 26 Chart 2: Market Share (by assets) of banking institutions (2003-2010) 26 Chart 3: Deposits, loans & loan-to-deposit ratio (2003-2010) 27 Chart 4: Numbers and percentage of banks meeting the CAR requirement (2003-2010) 27 Chart 5: NPL balance and ratio of commercial banks (2007-2010) 28 Chart 6: Asset impairment provisions and provisioning coverage ratio of commercial banks (2007-2010) 28 Chart 7: Income structure of banking institutions (2010) 28 Chart 8: Liquidity condition of banking institutions (December 2009 to December 2010) 28 Chart 9: Monthly average loan growth of banking institutions and the annualized GDP quarterly growth 44 Chart 10: Map of banking service coverage (2009-2010) 48 Chart 11: 2010 budget allocation by project 90 Table Table 1: Foreign banking establishments in China (As of end-2010) 38 Table 2: Foreign bank operations in China (2004-2010) 38 Table of contents
中国餐行业蓝督管委员会 Annual Report 2010 Chairman's Statement In 2010, we attached greater importance to guiding the banking sector in implementing the macroeconomic adjustment policies with a view to enabling sound and sustainable economic and financial development. Accordingly, we instructed banking institutions to improve their responsiveness to macroeconomic adjustment and industrial restructuring and effectively curb the impulse of reckless business and scale expansion We also continued to stress on appropriate allocation of credit supply, calling on banks to refrain from lending to high-polluting, energy tensive sectors and sectors with redundant capacity while extending the needed financial ingkang support to rural development, qualified sma enterprises, and those sectors and regions promoted by national development strategies The year 2010 marked the wrap-up of the eleventh Consequently, new loans issued in 2010 totaled Five- Year plan for National Economic and social RMB7.95 trillion, representing a relatively stable Development In the face of severe challenges at home and abroad rendered by the global financial pace of credit supply. Specifically, the goal was crisis, the China Banking Regulatory Commission achieved of ensuring the growth rate and scale of (CBRC) took swift and resolute actions to agricultural and small enterprises loans no lower than the average rate and scale of all loans newly safeguard the banking sector in China. Specifically, we endeavored to defend the bottom lines of risk disbursed. On the whole, the banking sect focused supervisory requirements, explore various has provided effective financial support to aid approaches to continuously build up supervisory various social undertakings such as disaster relief capacity and forge ahead the reform on different post-disaster reconstruction, the construction of fronts to boost the inherent dynamism of banking affordable and low-rent public housing renovation industry. These endeavors helped to sustain the of shanty towns, the production, processing and relatively fast and healthy development of banking transportation of farm produces, et system, which in turn contributed to the overall Banking reform was further advanced and economic development and social harmony in intensified in 2010 with a highlight to enhance China banks' core competence. In addition to
6 Annual Report 2010 The year 2010 marked the wrap-up of the Eleventh Five-Year Plan for National Economic and Social Development. In the face of severe challenges at home and abroad rendered by the global financial crisis, the China Banking Regulatory Commission (CBRC) took swift and resolute actions to safeguard the banking sector in China. Specifically, we endeavored to defend the bottom lines of riskfocused supervisory requirements, explore various approaches to continuously build up supervisory capacity, and forge ahead the reform on different fronts to boost the inherent dynamism of banking industry. These endeavors helped to sustain the relatively fast and healthy development of banking system, which in turn contributed to the overall economic development and social harmony in China. Chairman’s Statement Chairman’s Statement In 2010, we attached greater importance to guiding the banking sector in implementing the macroeconomic adjustment policies with a view to enabling sound and sustainable economic and financial development. Accordingly, we instructed banking institutions to improve their responsiveness to macroeconomic adjustment and industrial restructuring, and effectively curb the impulse of reckless business and scale expansion. We also continued to stress on appropriate allocation of credit supply, calling on banks to refrain from lending to high-polluting, energyintensive sectors and sectors with redundant capacity while extending the needed financial support to rural development, qualified small enterprises, and those sectors and regions promoted by national development strategies. Consequently, new loans issued in 2010 totaled RMB7.95 trillion, representing a relatively stable pace of credit supply. Specifically, the goal was achieved of ensuring the growth rate and scale of agricultural and small enterprises loans no lower than the average rate and scale of all loans newly disbursed. On the whole, the banking sector has provided effective financial support to aid various social undertakings such as disaster relief, post-disaster reconstruction, the construction of affordable and low-rent public housing, renovation of shanty towns, the production, processing and transportation of farm produces, etc. Banking reform was further advanced and intensified in 2010 with a highlight to enhance banks’ core competence. In addition to LIU Mingkang
strengthening external supervision and market in the business cooperation between commercial discipline, the CBrc strived to build up the internal banks and trust companies. As credit risk has been dynamism of banking industry by continuously and continues to be a major risk facing the chinese pushing banks to improve corporate governance. banking sector, the CBrC made unswerving efforts internal controls and risk management. Moreover, to promote the implementation of the"Three the CBRC continued its efforts to boost appropriate Rules and One Guidelines", the promulgation of business cooperation between local and foreign which signified the fundamental transformation banks aiming for win-win benefits, provide of loan disbursement and management practices guidance for the Chinese banks to prudently in China. As of end-2010. loans extended in deploy their overseas development strategies accordance with the new rules accounted for more and for foreign banks to explore appropriate than 50 percent of the total loans newly disbursed development strategies in China. In 2010, the while banks' provisioning coverage ratio reached Chinese banking sector was in a better shape 2180 than any time in history in terms of the overall risk level and risk resilience. 84 Chinese banks were In 2010, we placed a stronger emphasis on listed among the Banker's world top 1000 banks addressing the issue of"how to regulate", an issue underscored amidst current tide of international with four ranking among the top ten by market regulatory reform. On the front of legal framework building we continued the practice Substantial progress was also achieved in 2010 in of reviewing the existing rules and regulations improving the approach of addressing systemic every two years to make necessary amendments risks. Macro prudential supervision was practiced and formulate new rules to accommodate latest in a flexible manner to target the potential risks developments. As a result, a set of new rules and facing the banking sector as a whole. For instance, guidelines were issued in 2010 with respect to the to mitigate the risks associated with banks' lending performance evaluation of bank directors, banks to local government funding platforms(LGFP) compensation practices, consolidated supervision ed banks to review w and examine and management, country risk management, each and every loan to the LGFP, appropriately external auditing, etc. On the front of supervisory adjusting the loan categorization and resorting to capacity building, we continued to enrich our remedial measures as necessary; to address the supervisory"toolkit", upgrade the supervisory risks associated with real estate loans banks were information system, conduct systematic review required to adopt differentiated credit policies for rovement of our routine su residential mortgages, while taking preemptive practices of licensing, off-site surveillance and measures to mitigate their exposures to high-risk on-site examination We also made effective property developers use of our extended In addition, the Cbrc continued to remain tough warranted to promptly resolve the supervisory in combating banking crimes and frauds, and to concerns. At present, a new prudential supervisory address the"shadow banking"behaviors exposed framework has largely taken shape, featuring the Chairmans sta
7 strengthening external supervision and market discipline, the CBRC strived to build up the internal dynamism of banking industry by continuously pushing banks to improve corporate governance, internal controls and risk management. Moreover, the CBRC continued its efforts to boost appropriate business cooperation between local and foreign banks aiming for win-win benefits, provide guidance for the Chinese banks to prudently deploy their overseas development strategies and for foreign banks to explore appropriate development strategies in China. In 2010, the Chinese banking sector was in a better shape than any time in history in terms of the overall risk level and risk resilience. 84 Chinese banks were listed among the Banker's world top 1000 banks, with four ranking among the top ten by market capitalization. Substantial progress was also achieved in 2010 in improving the approach of addressing systemic risks. Macro prudential supervision was practiced in a flexible manner to target the potential risks facing the banking sector as a whole. For instance, to mitigate the risks associated with banks’ lending to local government funding platforms (LGFP), the CBRC required banks to review and examine each and every loan to the LGFP, appropriately adjusting the loan categorization and resorting to remedial measures as necessary; to address the risks associated with real estate loans, banks were required to adopt differentiated credit policies for residential mortgages, while taking preemptive measures to mitigate their exposures to high-risk property developers. In addition, the CBRC continued to remain tough in combating banking crimes and frauds, and to address the “shadow banking” behaviors exposed Chairman’s Statement in the business cooperation between commercial banks and trust companies. As credit risk has been and continues to be a major risk facing the Chinese banking sector, the CBRC made unswerving efforts to promote the implementation of the “Three Rules and One Guidelines”, the promulgation of which signified the fundamental transformation of loan disbursement and management practices in China. As of end-2010, loans extended in accordance with the new rules accounted for more than 50 percent of the total loans newly disbursed, while banks’ provisioning coverage ratio reached 218%. In 2010, we placed a stronger emphasis on addressing the issue of "how to regulate", an issue underscored amidst current tide of international regulatory reform. On the front of legal framework building, we continued the practice of reviewing the existing rules and regulations every two years to make necessary amendments and formulate new rules to accommodate latest developments. As a result, a set of new rules and guidelines were issued in 2010 with respect to the performance evaluation of bank directors, banks’ compensation practices, consolidated supervision and management, country risk management, external auditing, etc.. On the front of supervisory capacity building, we continued to enrich our supervisory "toolkit", upgrade the supervisory information system, conduct systematic review and improvement of our routine supervisory practices of licensing, off-site surveillance and on-site examination. We also made effective use of our extended examination power as warranted to promptly resolve the supervisory concerns. At present, a new prudential supervisory framework has largely taken shape, featuring the
C中国领行业蓝督管藏委员会 Annual Report 2010 combination of both macro and micro prudential banking sector successfully withstood various supervision and giving due considerations to both complicated and daunting challenges, and survived internationally prevailing practices and Chinas the recent global financial crisis largely safe and realities. In addition, we also formulated medium. sound Though our achievement is remarkable, the to-long term strategies for further improving the experiences we have gained during the process are supervisory effectiveness, together with clear and even more valuable cut roadmaps for the concurrent implementation The first is to stay committed to and constantly of Basel ll and Basel lll in China update the philosophy of prudential supervision Externally, the Cbrc has actively engaged in Immediately after its establishment, the CBrC the international policy dialogues regarding the out the supervisory philosophy of"conducting financial regulatory reforms and new standard- consolidated and risk-based supervision, focusing setting. The CBRC was also an active participant on risk management and internal controls, and in conducting the Financial Sector Assessment enhancing transparency". With such philosophy in Program(FSAP)in China and the assessment mind, the CBrc has developed a roadmap for on- of compliance with the Basel Core Principles for going supervision, ccurate loan classification Effective Banking Supervision. Moreover, the sufficient loss provisioning appropriate write-offs CBRC successfully hosted supervisory college acceptable profitability and adequate capital".For two of Chinas largest commercial banks, wher the supervision of financial innovation activities, home and host country supervisors effectively the CBrC specifically set forth supervisory shared supervisory information and perspectives hilosophy of"risks controllable, costs accountable Furthermore, the CBRC has signed Memorandum and information fully disclosed of Understandings(MOUs)or other forms of The second is to strike a proper balance between agreements on bilateral banking supervision with development and risk control. In addition to its supervisory counterparts in 42 countries, thereby purring sound economic development, banking actively engaging in cross-border supervisory institutions are required to escalate their own cooperation and information exchange development while holding on firmly to risk Since the inception of the CBRC, particularly controls, hence achieving a quality development during the Eleventh Five-Year Plan period, Chinas and real competence
8 Annual Report 2010 combination of both macro and micro prudential supervision and giving due considerations to both internationally prevailing practices and China’s realities. In addition, we also formulated mediumto-long term strategies for further improving the supervisory effectiveness, together with clear and cut roadmaps for the concurrent implementation of Basel II and Basel III in China. Externally, the CBRC has actively engaged in the international policy dialogues regarding the financial regulatory reforms and new standardsetting. The CBRC was also an active participant in conducting the Financial Sector Assessment Program (FSAP) in China and the assessment of compliance with the Basel Core Principles for Effective Banking Supervision. Moreover, the CBRC successfully hosted supervisory colleges for two of China’s largest commercial banks, where home and host country supervisors effectively shared supervisory information and perspectives. Furthermore, the CBRC has signed Memorandum of Understandings (MOUs) or other forms of agreements on bilateral banking supervision with its supervisory counterparts in 42 countries, thereby actively engaging in cross-border supervisory cooperation and information exchange. Since the inception of the CBRC, particularly during the Eleventh Five-Year Plan period, China’s banking sector successfully withstood various complicated and daunting challenges, and survived the recent global financial crisis largely safe and sound. Though our achievement is remarkable, the experiences we have gained during the process are even more valuable. The first is to stay committed to and constantly update the philosophy of prudential supervision. Immediately after its establishment, the CBRC set out the supervisory philosophy of “conducting consolidated and risk-based supervision, focusing on risk management and internal controls, and enhancing transparency”. With such philosophy in mind, the CBRC has developed a roadmap for ongoing supervision, i.e. “accurate loan classification, sufficient loss provisioning, appropriate write-offs, acceptable profitability and adequate capital”. For the supervision of financial innovation activities, the CBRC specifically set forth supervisory philosophy of “risks controllable, costs accountable and information fully disclosed”. The second is to strike a proper balance between development and risk control. In addition to spurring sound economic development, banking institutions are required to escalate their own development while holding on firmly to risk controls, hence achieving a quality development and real competence. Chairman’s Statement
