Core Viewpoint - The recent approval by regulatory authorities for banks to abolish their supervisory boards and transfer their functions to the audit committee of the board is a significant shift in corporate governance within the banking sector in China [1][2][3] Group 1: Regulatory Changes - Over ten banks have announced the approval to abolish their supervisory boards, including prominent banks such as Wuxi Rural Commercial Bank, Changshu Bank, Zhengzhou Bank, and Shanghai Bank [1] - The new Company Law, effective from July 1, 2024, allows joint-stock companies to establish an audit committee composed of directors to perform the functions of the supervisory board, eliminating the need for a supervisory board [2] - The National Financial Supervision Administration's notification in December 2025 further clarifies that financial institutions can set up an audit committee in accordance with their articles of association, thereby not requiring a supervisory board [2] Group 2: Historical Context and Implications - The supervisory board system was introduced in the 1990s in China's banking sector, modeled after the German system, to establish an independent supervisory layer [3] - The original intent of the supervisory board was to act as a supervisor in corporate governance, ensuring compliance and asset safety, but it has often struggled to fulfill this role effectively [3] - The transition to an audit committee, typically composed of directors with financial and risk management backgrounds, is expected to enhance governance efficiency by integrating supervisory functions into the decision-making core of the board [3]

Core Viewpoint - The announcement from major Chinese banks regarding the abolition or non-establishment of supervisory boards indicates a significant transformation in the governance structure of the banking sector [1][3]. Group 1: Changes in Governance Structure - Major banks including Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, and Bank of Communications have announced the removal or non-establishment of supervisory boards [1]. - The new Company Law of the People's Republic of China, effective July 2024, allows companies to establish an audit committee within the board of directors, which can perform the functions of a supervisory board [1][3]. - The supervisory board, previously responsible for overseeing financial activities and ensuring compliance, is now optional, with the decision left to the shareholders' meeting [1][3]. Group 2: Implications for Leadership Roles - The cancellation of the supervisory board has led to vacancies in roles traditionally held by the supervisory board chair, often a deputy secretary of the party committee [3]. - Some banks have appointed dedicated deputy secretaries to focus on party-building work, indicating a shift in leadership structure [3]. - The recent resignation of Liu Jin from his position as Vice President of Bank of China, who will now serve as the party committee deputy secretary, reflects these changes [4]. Group 3: Industry Perspectives - There has been considerable discussion within the industry regarding the potential weakening of the supervisory board, with opinions suggesting that the dual system of independent directors and supervisory boards has led to overlapping responsibilities and increased personnel costs [3]. - The National Financial Supervision Administration has clarified that financial institutions can choose to establish an audit committee instead of a supervisory board, further emphasizing the shift in governance practices [3].

Group 1 - The core viewpoint is that seven major banks in China have decided to abolish their supervisory boards, reflecting a significant transformation in the banking sector in response to regulatory changes [1][2] - The banks involved include Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, China Merchants Bank, and Huaxia Bank, all of which have passed resolutions to eliminate their supervisory boards [1] - The decision aligns with the revised Company Law of the People's Republic of China, effective July 2024, which allows companies to establish an audit committee within the board of directors to perform the functions of a supervisory board [2] Group 2 - The National Financial Regulatory Administration issued a notice in December 2024, indicating that financial institutions can set up an audit committee within the board to exercise the powers of a supervisory board, thereby eliminating the need for a supervisory board [2] - This regulatory change is expected to reduce management costs and enhance the flexibility and effectiveness of corporate governance in the banking sector [2]