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Bank of China's Persistence in Compliance Management


2008-07-01

 

Risk Management

By unceasingly improving risk management system and reinforcing centralization and specialization of risk management, Bank of China has seen continuous improvement of assets quality, optimized credit structure, reasonable credit cost, and increasingly higher provision coverage ratio.

The bank applies vertical risk management in branches, and counter risk management in business lines.

Credit management of the bank is highly centralized, with the Head Office and first-level branches completely undertaking credit approval and corporate credit rating, as well as loan risk classification.

With assets quality supervision system, the bank strengthens monitoring on asset quality, and reinforces subdivided management and supervision on risks of special-mentioned loan, while laying emphasis on supervision of potentially high-risk customers with features like large credit scale, frequent capital operation, unsound governance mechanism and opaque information.

Internal Control

Bank of China consolidates the "three defense lines" construction by setting up the law and compliance departments in the Head Office and first-level branches at home, and appointing full-time or part-time compliance officers at overseas institutions; meanwhile, the bank has formulated and publicized the Compliance Policy for the group, specifying the compliance responsibility of all staff and administrators, standardizing the rules and regulations, formulating work schemes on authorization management and setting up the key contracts filing system.

The bank invites an independent intermediary organ for assessment on the audit, and formulates an optimized plan based on the assessment results and the requirements of regulatory authorities for the audit on organization structure, management system, policy system, practical technologies and so on; furthermore, it reinforces the vertical administration of Head Office for audit by setting up a well-bedded and interconnected auditing system, fulfilling various functions such as audit confirmation, anti-fraud measure, consultation service and internal assessment.

Bank of China attaches great importance to the risk control of overseas branches, and ensures the conformity of internal management and businesses of overseas branches to regulatory requirements through enhancing communication with overseas regulators and establishment of the Administration Regulations on Overseas Branch Compliance Officers.

Regulations such as the Guidance on Information Communication of Subsidiary Companies and the Guidance on Administration Function and Workflow of Overseas Affiliated Banks formulated by Bank of China guarantee that the directors and the supervisors are informed of the business conditions of the affiliations.

International Conventions

Bank of China studied and practiced the New Capital Accord released by the Basle Committee on Banking Supervision relatively earlier than the other domestic counterparts did, participated in compiling the New Capital Accord as organized by the China Banking Regulatory Commission, and also took part in the quantitative influence test held by the People's Bank of China. The bank has conducted a series of works in the fields of credit risk, market risk, operating risk and so on since 2005, including the data gap analysis and the PD model development for corporate customers.

Bank of China set up a leading group comprised of senior management and department chiefs for the implementation of New Capital Accord, and a planning and coordination office to instruct and plan for the implementation of New Capital Accord. Board of Directors approved the gap analysis and general planning report on the implementation of New Capital Accord containing the explicit criteria, route map and timetable of the implementation. Seven among the 14 overseas branches have met the relevant requirements of the New Capital Accord by the local regulators while the other seven branches are accelerating the progress.

 

According to the Anti-Money Laundering Law and the supervisory rules, Bank of China has clarified the requirements and management frame of the group for anti-money laundering, and fulfilled its obligations of identifying the customers, training staff, reporting large-amount and suspicious transactions accurately and timely, and has cooperated with regulators and international communities on anti-money laundering investigations. In 2007, the domestic branches of the bank held more than 2,500 training courses on anti-money laundering, attracting participation of 200,000 person-times.

Bank of China strictly executes the prohibition of the UN Security Council on providing financial services to organizations and individuals engaged in money laundering, financing of terrorism and proliferation of weapons of mass destruction. The bank also pays attention to and implement the anti-money laundering and anti-terrorism financing regulations of international organizations, places of business and countries with which it has business contact.

The Intellectual Property Management Methods formulated and implemented by Bank of China standardizes the intellectual property protection and management process throughout the bank.

Information Disclosure

 

Attaching high importance to the information disclosure and maintenance of investors relation, Bank of China strives to ensure the timeliness, fairness, authenticity and completeness of information disclosure. The bank applies the principle of "high standards, strictness and majority decision" in information disclosure to all investors for fairness. Bank of China revised the information disclosure policy according to the new supervisory requirement in 2007, passing the examination and approval by the Board of Directors.

Since it was listed, Bank of China has been maintaining and promoting communication with investors through performance conference, press conference, road show, online live broadcast, meeting with institutional investors, E-mail and hotlines, so as to solicit opinions from investors, properly adopt their suggestions and give feedback. During the period between it was listed and the end of 2007, Bank of China had held 257 meetings with international and domestic investors.

Bank of China formulated the Management Methods on Related Transactions according to the listing supervision requirements of Hong Kong and China's mainland, which is practiced in the whole jurisdiction to ensure lawful approval and disclosure of related transactions.

Bank of China established a reporting system for major irregularities, requiring all institutions in the jurisdiction to report major irregularities regularly and continuously monitoring the rectification of major irregularities.

The bank gave training on the listing rules and information disclosure of the Hong Kong Stock Exchange and the Shanghai Stock Exchange to the directors, supervisors, senior administrators and personnel above senior managers in the Head Office in 2007.

Popularization of Legal Knowledge

The bank compiled the Analysis on the Legal Issues of Corporate Crediting Business, the Legal Consulting Compilation and the Bank Cases Analysis, and organized study activities throughout its jurisdiction.

Bank of China carries out compliance tests from time to time. 204,000 administrators and staff of various levels throughout the jurisdiction took the test with a qualification rate of 99.97% in 2007.

An internal Laws and Compliance Information Website established by the bank provides the latest laws, regulations and supervisory requirements in a timely manner, and periodically or from time to time uploads the compliance risk prompts, training materials and videos of legal knowledge and so on.

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