Focus on capital obligations of major bank shareholders

The China Banking Regulatory Commission (CBRC) issued the Interim Measures for the Administration of the Equity of Commercial Banks (the Measures) on 5 January 2018 to regulate the acts of the major shareholders of commercial banks, protect the legitimate rights and interests of commercial banks, depositors and other customers, safeguard the legitimate interests of shareholders, and promote the sustainable and healthy development of commercial banks. The measures took effect on the date of its issuance.

The measures highlight regulation on major shareholders to curb their abuse of rights, the hollowing out of banks, etc. Major shareholders of a commercial bank refer to those that hold or control at least 5% of the shares or voting rights in a commercial bank, or hold less than 5% of such bank’s total capital or total shares but exert material influence on the operations and management of the commercial bank.

The measures’ regulation of major shareholders of commercial banks includes one aggravating obligation on shareholders – major shareholders undertake a capital supplementation obligation, requiring them to undertake in writing to supplement the capital of the commercial bank when necessary and to annually report on their capital supplementation capacity to the CBRC or its agency via the commercial bank.

Wu Jiejiang is a partner at Jingtian & Gongcheng