Contributed by Freshfields Bruckhaus Deringer LLP

November 27 2009

On August 25 2009 the China Banking Regulatory Commission promulgated guidelines on reputational risk management in commercial banks. The guidelines apply widely, covering all Chinese commercial banks, banks established through equity joint ventures and foreign-invested banks.

The guidelines encourage such banks to

(i) integrate reputational risk management into their corporate governance and overall risk management systems, and

(ii) take proactive and effective measures to minimize adverse effects on the public and society.

The guidelines urge banks to establish management systems that include:

• regular checks and analyses of issues that may lead to reputational risk;
• a method for classifying such issues;
• a complaints management system; and
• mechanisms for recording and filtering risk information.

Directors are required to assume ultimate responsibility for reputation risk management. The guidelines state that they will be expected to:

• check, supervise and ensure the prompt handling of reputational risk management duties by senior management;
• authorize a separate department or team to take charge of reputational risk management, depending on the bank and the resources available to it;
• identify the roles that various departments play in reputational risk management; and
• ensure that staff receive adequate internal training in risk awareness and risk-handling skills.

For further information on this topic please contact Melissa Thomas at Freshfields Bruckhaus Deringer by telephone ( +86 21 5049 1118 , +86 21 5049 1118 ), fax (+86 21 3878 0099) or email (melissa.thomas@freshfields.com).  Source: