Promoting the sound operation of corporate governance structure and ensuring the healthy and sustainable business growth

Since the board of supervisors of China Construction Bank Corporation (CCB) was established two years ago, it has been learning from the experience of leading international banks and actively exploring new ways of fulfilling its functions. It has played a constructive supervisory role in promoting the sound operation of corporate governance structure and ensuring the healthy and sustainable business growth.

It is said that the current board of supervisors of CCB is composed of 7 supervisors, including 4 shareholder representatives, 2 external supervisors and 1 staff representative. They have working or managerial experience and expertise in financial supervision, commercial banking, corporate accounting, auditing and law. As the first among the four major state-owned commercial banks conducting the shareholding reform and getting listed, CCB has accelerated the reform of governance structure, well defined the responsibilities of and check of balance among its shareholders’ meeting, board of directors, board of supervisors and senior management. The board of supervisors is responsible for the shareholders’ meeting and has faithfully fulfilled its functions according to related laws and regulations and corporate rules. Without much mature experience to be learned from others, the board of supervisors is learning by doing to increase understanding of its own responsibilities and has fairly well solved the problems of “what to supervise” and “how to supervise”.

To effectively proceed with supervision and investigation, the CCB board of supervisors starts from standardizing the internal operation and formulating various systems. In line with related laws and regulations and corporate rules, it has formulated a number of rules such as the Working Procedures of the Board of Supervisors, the Rules for the Supervision of the Board of Supervisors on the Board of Directors, the Senior Management and Their Members and the Interim Rules on the Performance Evaluation of the Supervisors, developed the procedures of supervision and investigation and the standards of recording, filing and analyzing supervision information and documents and initially built the institutional framework meeting its current needs.

According to the corporate rules, the CCB board of supervisors establishes two special committees, i.e. the function fulfillment supervision committee and the financial and internal control supervision committee. The two committees have formulated their working plans, identified their priorities at different stages and started their supervisory work step by step. With the effective operation of the special committees, its supervision on key areas has been strengthened and become more professional and qualified.

While proceeding with the function fulfillment, financial and internal control supervision, the CCB board of supervisors gives top priority to supervising the performance of the board of directors and the senior management in some key aspects. The board of supervisors supervises the decision-making, implementation of decisions, operational activities and the performance of the directors and members of the senior management by attending the shareholders’ meeting and the meetings of the board of directors and its special committees and the management as nonvoting delegates and checking documents and files and establishes the individual performance supervision files for evaluation purpose. 

In terms of financial supervision, the CCB board of supervisors has organized examinations on the risk classification and provision of credit assets and held working talks and kept regular contacts with external accounting firms on the results of financial audit, the truthfulness and fairness of financial statements and the implementation of domestic and international accounting principles.

In terms of internal control supervision, the board of supervisors focuses on a number of key links. After the shareholding reform, the internal audit department of the CCB adopts the vertical management and the board of supervisors is responsible for guiding the work of the internal audit department. Therefore, the board strengthens contacts with the board of directors and its related audit and risk management committees and other functional departments to get informed of the risk management throughout the bank, tracks the efforts of the board of directors and the senior management to improve internal control and holds a number of special examinations and studies on the compliance of business activities with the established risk control system. They keep a close eye on the fulfillment of functions of the related-party transaction control committee of the board of directors and conduct working meetings with related business units.

The board of supervisors also actively explores new models of function fulfillment supervision. In the past two years the board has insisted on the face-to-face talks with all the directors, members of the senior management and even each supervisor of the bank. To get an overall picture of and accurately assess the function fulfillment of the board of directors, the senior management and their members, it also holds face-to-face talks with the heads of a number of departments at the headquarters and branches. Some independent directors of CCB are senior foreign experts. They did not imagine that the bank’s board of supervisors would appoint face-to-face talks with them to supervise their fulfillment of functions as independent directors. They are deeply impressed by and on many occasions express full reorganization on the hard work of the board of supervisors.

The board of supervisors tries to use different supervisory methods. For example, it adopts such supervisory methods as attending meetings as nonvoting delegates, checking documents, examination and study, evaluation and interviews for different supervisory purposes, combines the supervision on the bank’s financial activities and internal control with the supervision on the function fulfillment of the board of directors, the senior management and their members and the off-site supervision with spot check. The introduction of various supervisory methods helps make more objective and comprehensive supervision and assessment and has achieved sound results.

The board of supervisors pays special attention to properly handling the relations and strengthening communications and coordination with the shareholders’ meeting, the board of directors and the senior management and carefully listens to their opinions and suggestions on internal supervision. The supervisors offer expert advices on the major tasks of the bank such as the shareholding reform and the IPO from the perspective of internal supervision. Meanwhile, they attach importance to avoiding overlapped examinations and interference into normal business activities so as to make their supervisory efforts the driving force behind the reform and development of the bank.

The reporter was told that the board of supervisors of CCB always follows the principle of being objective and independent to raise opinions and suggestions on the problems discovered in the process of supervision and examination to related departments and branches. It reports the major problems or issues which should be noted to the board of directors and the senior management in a timely manner. The board of directors and the senior management pay much attention to those problems and take timely corrective measures with sound results being achieved.

Xie Duyang, Chairman of the board of supervisors of CCB said that from a macro perspective the first line of supervision of shareholding banks lies in the management, the second line in the board of directors and the third line in the board of supervisors. Therefore, what is important to the board of supervisors is not to find some detailed problems but to get the overall picture, highlight the priorities and prevent the problem before it occurs. In this way the work of the board of supervisors will be well understood and receive coordination and support.

The performance and effect during the past more than one year demonstrate that the supervision of the bank’s board of supervisors is gradually showing results and the board is playing a role which is irreplaceable by any other supervisory bodies. With the joint efforts of all parties concerned, the pattern of check of balance and sound interaction has been initially built in CCB.