Core Viewpoint - The recent trend of financial institutions in China, such as Northeast Securities and China Aviation Fund, abolishing their supervisory boards reflects a significant shift in internal governance structures, driven by the new Company Law effective from July 2024, which allows for the audit committee to assume the supervisory board's responsibilities [1][2]. Group 1: Background and Context - Financial institutions established supervisory boards to prevent power abuse through financial and performance oversight, but issues such as lack of independence and professionalism have led to their marginalization [1]. - The new Company Law provides a legal basis for financial institutions to optimize governance structures by allowing the audit committee to take over the supervisory board's functions [1]. Group 2: Implications of the Change - The transition from supervisory boards to audit committees is expected to enhance governance efficiency by resolving overlapping supervisory functions, which previously led to unclear responsibilities and resource wastage [2]. - Audit committees, typically composed of independent directors with financial and risk management backgrounds, are seen as more capable of providing effective oversight compared to the often internally dominated supervisory boards [2]. - The integration of the audit committee within the board of directors allows for earlier involvement in major decision-making processes, thereby strengthening risk control from the outset [2]. Group 3: Challenges Ahead - While the audit committee is positioned to enhance internal governance, it faces the challenge of ensuring accountability not only to the management but also to the board of directors, which is crucial for effective oversight [2].