China banks get guidanceApril 2009
A further sign that corporate responsibility is taking hold in China has emerged with the publication of CSR guidelines for the country’s financial institutions.
The recommendations, from the China Banking Association, which promotes self-regulation, advise all financial sector companies to produce an initial CSR report for submission to the association by the end of June this year – and then annually with independent verification. They also recommend Chinese financial institutions to form dedicated corporate responsibility departments if they have not already done so.
The guidelines apply to foreign-owned institutions operating in China as well as Chinese companies. Uptake is voluntary, but the association will offer incentives to those that comply, including regular name checks in publicity material and favourable reporting of their programmes to the government’s China Banking Regulatory Commission.
The association, established with government support in 2000, has 81 full members and 37 associate members, including the ‘big four’ state-owned banks – such as Bank of China – and commercial banks such as the Bank of Shanghai. Chinese banks now have a bigger market capitalization than those in the US.
The guidelines concentrate on consumer credit, warning institutions that they, and not the government, should bear the main responsibility for providing financial literacy programmes and debt guidance. They should also construct ‘honest and trustworthy’ credit systems that do not tempt consumers into severe indebtedness.
On larger-scale loans, the guidelines highlight the Equator Principles, a set of global recommendations on ethical project lending. They do not specifically advise banks to adopt the principles but say they should at least attempt to ‘borrow and learn’ from them. Throughout the document the association emphasizes that programmes should be tailor-made for local conditions, not imported from elsewhere.
The guidelines stress the financial sector’s economic responsibility to create wealth while building up ‘a fair, safe and competitive industry’. The creation of CSR departments is seen as best practice, but companies are also urged to integrate corporate responsibility into their operations, not least by including responsible business objectives in performance reviews.
The code also says institutions should write a ‘vision statement’ with an ethical philosophy, compile a strategy and appoint an internal task force to execute it.
Clare Pearson, corporate social responsibility manager for Asia at the international law firm DLA Piper, told EP the guidelines would have ‘wide-reaching implications’ for China’s banking institutions. ‘Although they don’t have the authority of law, the fact that they have the stamp of approval from an organization as powerful as the China Banking Association gives them equal impact,’ she said. ‘Banks that don’t fulfil the guidelines could find their reputation will suffer.’
Pearson said the guidelines reflected a growing interest in corporate responsibility in China, but were also partly an attempt to learn lessons from foreign banks’ irresponsible lending. ‘Maybe China has seen what happens when credit gets out of control in other countries and is taking action to avoid repeating these mistakes at home,’ she said.
see editorial, p12