On January 14, the official website of the China Banking and Insurance Regulatory Commission announced that in order to further strengthen the supervision of related party transactions, standardize the related party transactions of banking and insurance institutions and prevent the risk of interest transmission, the China Banking and Insurance Regulatory Commission recently issued the measures for the administration of related party transactions of banking and insurance institutions (hereinafter referred to as the measures). The measures will come into force on March 1, 2022. In the near future, an implementation notice will be issued to clarify the arrangements for the transition period.
The person in charge of relevant departments of the China Banking and Insurance Regulatory Commission said that in recent years, with the rapid development of the Bank Of China Limited(601988) insurance industry, the risk exposure caused by related party transactions of banking and insurance institutions has continued to appear. Problems such as evading supervision and obtaining benefits by hiding related party relationships, designing complex transaction structures and using subsidiaries to provide funds in violation of regulations have occurred from time to time, and even caused major risks, In order to make up for the shortcomings of the system, it is necessary to further revise and improve the relevant regulatory provisions on connected transactions.
The general provisions of the Measures specify that bancassurance institutions shall not transfer interests or regulatory arbitrage through related party transactions, and shall take effective measures to prevent related parties from using their special status to infringe the interests of Bancassurance institutions through related party transactions. Banking and insurance institutions shall maintain operational independence, improve market competitiveness, control the number and scale of related party transactions, avoid multi-layer nesting and other complex arrangements, and focus on preventing the risk of interest transmission to shareholders and their related parties.
In terms of identification and identification of related parties, the person in charge introduced that the measures adopted a combination of direct identification and substance over form identification, reasonably defined the scope of related parties and penetrated through the identification of related parties at all levels. Learn from the common practices outside China and adopt the direct identification method for key related parties according to the importance and risk. The main shareholders penetrate upward to the controlling shareholders and actual controllers and downward to the legal persons under their control, focusing on preventing the risk of transferring benefits to shareholders. At the same time, the subsidiary is included in the related parties to prevent the risk of benefit transmission through the subsidiary. Commercial banks with related relationships will be included in related parties to prevent the risk of major shareholders obtaining bank funds by implicitly holding shares in multiple banks.
Adhering to the problem orientation, the measures set prohibitive provisions on illegal behaviors such as interest transfer to related parties through complex transaction structure or channel business and avoiding supervision, requiring institutions to optimize the identification of related parties and related transactions and strengthen the management of related transactions in key fields such as off balance sheet, asset management and interbank in accordance with the principle of substance over form and penetrating supervision.
Among them, the prohibitive provisions include that banking and insurance institutions shall not evade the approval or regulatory requirements of major related party transactions by covering up related party relationships, splitting transactions and other covert ways; Banking and insurance institutions shall not use various nested transactions to lengthen the financing chain, obscure the essence of business, evade regulatory provisions, and shall not illegally finance, transfer assets, idle arbitrage, hide risks, etc. for shareholders and their related parties; Banking institutions shall not directly provide funds to related parties through or through interbank, financial management, off balance sheet and other businesses, break through the proportion limit or violate the regulations; Insurance institutions shall not break through regulatory restrictions in disguise by means of real estate projects, non insurance subsidiaries, trust plans, investment in asset management products, or other channels and nesting methods to provide financing for related parties in violation of regulations.
At the same time, the measures also compact the main responsibilities of institutions in the management of related party transactions, establish an accountability mechanism at all levels, strengthen the functions of related party transaction control committee, set up a cross departmental related party transaction management office at the management level, clarify the leading department and set up special posts, and implement the identification of related parties and the daily management of related party transactions.
The CBRC said that the promulgation and implementation of the measures is an important measure for the CBRC to further improve the management of related party transactions in the banking and insurance industry. It is of great significance to strengthen the management of related party transactions of banking and insurance institutions, promote the rectification of related party transactions and prevent the risk of interest transmission. Next, the CBRC will guide and urge all banking and insurance institutions to earnestly implement the measures, continuously improve the management level of Bank Of China Limited(601988) insurance institutions' connected transactions, strive to build a corporate governance mechanism of banking and insurance industry with Chinese characteristics, and promote the high-quality development of banking and insurance institutions.
