China Commercial Bank Information Disclosure System

Timely and effective information disclosure is not only an important component of effective bank supervision, but also a key impetus to improve the performance of commercial banks. Therefore, it has become common understanding in the international banking industry that there is an urgent need to enhance transparent operation of the commercial banking system. As an enterprise specializes in operating credit currency, commercial banks theoretically have the same incentives to disclose information as other enterprises, including incentives for voluntary disclosure and incentives for compulsory disclosure. Commercial banks are also enterprises with high liability, and their funds are mostly from depositors. More importantly, commercial banks play a key role in the financial system of one country and have an extremely strong externalities. Therefore, information disclosure is not exclusively for the benefit of depositors; it is of significant importance for both commercial banks and the supervisory authority. Thus , the author argues that it is imperative for China to develop an information disclosure system of commercial banks. This information disclosure system includes both voluntary information disclosure and compulsory information disclosure. However, due to the fact that the market-oriented banking industries are far from satisfactory in China, compulsory information disclosure is the best alternative at present.The initial objective of this information disclosure system is to protect the legal interest of investors (depositors)—a weak group. However, if compulsory information disclosure mainly cares for the interest of investors without consideration of that of disclosure entities—commercial banks, the maintenance of fairness that investors enjoy is certainly at the expense of the legitimate interest of commercial banks. Apparently, this result is not a Pareto Optimum, thus it should not become the objective of the compulsory information disclosure system. In addition, in the process for developing a commercial bank information disclosure system, the supervisory authority should stick to two standards of "effectiveness" and "adequacy". Effectiveness is the basic requirement for commercial bank information disclosure, while adequacy is the limitation of the disclosure behavior. Either efficiency or adequacy is such an integral part that the former is the precondition of the latter while the latter is the control requirement of the former. Before 2002, China had no exclusive laws to regulate the information disclosure of commercial banks. Listed companies disclose information in accord with listed companies' related rules; while unlisted companies disclose information too, but with a random content. In May of 2002, the People's Bank of China issued the Provisional Rules on Commercial Bank Information Disclosure. The issuance marks that our commercial bank information disclosure substantially goes a step towards the legal system construction. However, information disclosures of 2003 show that there are still many issues. In order to improve the effectiveness of commercial bank information disclosure, China should make full use of the supervision function of supervisory authority, improve related laws and regulations, enforce the corporation governance structure, improve management levels and technological skills to operate a commercial bank, and make intermediaries play a role in the social supervision.