CBRC Issued the Regulation on China Development Bank

The Report of the 19th CPC National Congress stressed the necessity of deepening the financial system reform, enhancing the system’s capacity of supporting the real economy, improving the financial regulatory system, and forestalling systemic financial risks. In line with the spirit of the Congress, and to implement the plan on deepening the reform of China Development Bank (hereinafter referred to as “CDB”), strengthen areas of weakness of the regulatory system, and prevent and resolve the financial risks under the new situation, the CBRC recently issued the Regulation on China Development Bank (hereinafter referred to as “the Regulation”).

The Regulation was issued to meet the CDB’s needs to deepen the reform, further strengthen its areas of weakness in regulation and supervision. The introduction of the Regulation plays a critical role in promoting the Bank to operate in a safe, stable and sustainable way, thus enabling it to better serve national strategies and support the sound development of both the economy and society.

The Regulation highlights CDB’s position as a development financial institution and its features of serving national strategies. It also emphasizes the market-based operation and subjects the bank to general rules governing the banking industry. All aspects of CDB’s operation, management and prudential supervision are covered in this comprehensive Regulation.

The Regulation consists of 9 Chapters with 66 Articles: General Provisions, Market Positioning, Corporate Governance, Risk Management, Internal Control, Capital Management, Incentives and Restraints, Supervision and Administration, and Supplementary Provisions. The following five aspects are highlighted: 1) the Bank should adhere to its position as a financial institution for development, focusing on development business with commercial business as a supplement. It should fulfill its role in mid- and long-term investment and financing and increase support for key and weak areas of the economy and society; 2) the Bank should improve the modern financial enterprise system and build a corporate governance mechanism featuring scientific decision-making, robust implementation, and effective supervision; 3) the Bank should strengthen its risk management and internal control by establishing a risk management and internal control system which is consistent with the banking industry’s general operation rules and the Bank’s role as a bank for development; 4) the Bank should set up and develop a capital mechanism based on a sound capital adequacy ratio; 5) the Bank should strengthen its accountability system and establish an incentive and restraint mechanism according to the characteristics of development financing.

The introduction of the Regulation will help improve the supervisory and regulatory system over CDB and bring the regulation of it under the rule of law. It will also strengthen the risk control over the Bank and upgrade its capacity for standardized operation and management to ensure a healthy and sustainable development.