Today China Construction Bank (CCB) spokesman Xi Deyan announced that CCB appoints Pang Xiusheng as Chief Financial Officer (CFO) and Zhu Xiaohuang as Chief Risk Officer (CRO) of China Construction Bank Corporation according to the CCB Board of Directors’ resolution and with the approval of China Banking Regulatory Committee (CBRC). The appointment marks further improvement of CCB’s corporate governance mechanism and is of great importance to raising its operational and management capacity, especially the financial and risk management capacity and core competitiveness, maximizing its value and realizing sustainable and healthy growth.

 

 

Last year CCB advertised for a Chief Risk Officer globally, but why today it appoints the CRO from internal?

 

The spokesman said that last year CCB advertised for a CRO on both Chinese and overseas media with the purpose of enhancing its risk management and internal control and ensuring healthy business growth through recruiting senior managerial personnel globally. However, the bank failed to find the appropriate person meeting its strict recruitment conditions. It is fairly difficult to find a person having the risk management experience of leading international banks, deep understanding of China’s reality and fluent language skill at the same time. In fact, CCB itself has excellent senior managerial staffs. The appointment of the new CFO and CRO is the result of choosing from a number of qualified candidates strictly following the selection procedures and related laws, regulations and corporate rules openly and transparently. They have rich banking experiences and outstanding management capacity and are fairly familiar with China’s national conditions and banking industry reform and development. Currently both of them enjoy the government special allowance. Therefore, they are qualified for their new positions.

 

CCB always pays great attention to absorbing and introducing leading foreign management experience. In terms of financial and risk management, we have invited a number of senior international experts to share their experiences with us. Learning from the experience of international leading banks, especially the mature experience of our strategic partner Bank of America, and introducing their practices have achieved tangible results, such as implementing the independent credit officer system, introducing the EVA, economic capital evaluation mechanism and management system and developing the risk early warning system. Recently, the bank also invited a number of senior foreign managerial officers including Mark Lawrence, former CRO of Australia and New Zealand Banking Group Limited, to give training and consultations on risk management. Meanwhile, CCB will also invite well-known international risk and financial management experts as the consultants to its CFO and CRO. In the future, the bank will intensify efforts of recruiting human resources and try to attract more senior professionals from home and abroad to work for it. It will actively explore such an operational model with Chinese characteristics based on its own realities.

 

What are the functions of the CFO and CRO?

 

According to the spokesman, CFO and CRO are key members of the senior management of modern businesses as well as two of the major formulators and executors of important corporate strategies and decisions. Following the requirement of the Board of Directors, they are responsible for the president and should assist the work of the president or the vice president with authorization of the president.

 

From the strategic perspective, CFO mainly helps the president or the vice president authorized by the president to formulate the bank’s financial management strategy and ensures such a strategy is an integral part of the bank’s overall strategy. CFO is also responsible for the execution of financial management strategy under the leadership of the president or the vice president authorized by the president. CRO mainly assists the president or the vice president authorized by the president in developing and implementing the bank’s risk control strategy, basic policies of credit risk, market risk and operational risk, management system and credit risk control process and supports the implementation of the bank’s overall strategy.

 

In terms of execution, both the CFO and CRO will participate in the major decision making process of the bank, help the president or the vice president authorized by the president fulfill their responsibilities in accordance with law and manage related business units to ensure the completion of the annual goals of those business unites under their management.

 

CFO will also assist the president or the vice president authorized by the president develop related policies, business process improvement scheme and management systems for the business units under his management, ensure that those business units operate in compliance with laws and regulations as well as internal policies and develop healthily. In response to market and customer demands, CFO should raise proposals on improving the competitiveness of financial management and developing products and services meeting the financial management needs of customers, help with the development of annual operational plan of the business units under his management and supervise the implementation of the plans.

 

CRO is mainly responsible for establishing the bank’s overall risk management policies and strategy, building the comprehensive risk management organizational structure covering credit risk, market risk and operational risk, participating in the major decision-making process throughout the bank, directly reporting the assets quality and risk management to the president and the risk management committee, organizing the audit of credit projects, helping the president or the vice president authorized by the president formulate risk management and internal control policies, business process improvement plans and management system, ensuring the bank manages credit risks in line with the risk control process and its business complies with related laws, regulations and policies.

Under the leadership of the president or the vice president authorized by the president, the CFO and CRO are also responsible for evaluating the performance of the heads of business units under their management. They will raise suggestions to the president or the vice president authorized by the president on whether such heads should be promoted or not according to the business development needs as well as the performance, capacity and leadership of those heads.

 

 

What is the qualification requirement for the CFO and CRO?

 

According to the spokesperson, the qualification requirement is as follows: bachelor’s degree or above; over 8 years of working experience in the financial industry or over 12 years of economic work experience (including over 5 years of financial industry working experience); 8 years of management experience or above; compliance with the qualification requirement for senior bank managers raised by the CBRC.

 

The CVs of the CFO and CRO (see annex) show that they not only totally meet the above requirement but also have rich banking and managerial experiences. They are senior professionals of CCB.

 

What are the achievements of financial and risk management CCB has made in recent years?

 

According to the 2005 business performance statistics issued by CCB, by the end of 2005 its tire 1 capital has reached RMB287.677 billion, up 47.1% over 2004 and core capital adequacy ratio 11.08%, up 2.51% over 2004, which makes it a leading bank in the Chinese and other emerging markets globally. The bank’s NPL ratio has dropped to 3.84%, which should be attributed to the improvement of profitability and risk assets control capacity, said the spokesman.

 

In recent years, CCB has been committed to building the financial management culture and effective resources allocation mechanism of modern bank. It raised the business philosophy of maximizing value in 2001 and set up the economic added value-centric performance evaluation and incentive mechanisms in 2002. The sense of cost, risks and output throughout the bank has been enhanced considerably and ability of creating value further grows. In 2005, the bank introduced the concept of Balanced Score Card, set up the KPI and improved the value-centric performance evaluation system. Meanwhile, CCB has enhanced its strategic cost management and as a result raised its competitiveness and profitability. As a listed bank, it also builds up the internal control system of financial accounting report and practices the internationalization and standardization of information disclosure.

 

CCB always attaches great importance to risk management and value creation. Since last year CCB has achieved remarkable results of improving corporate governance structure and raising risk management capacity and asset quality and initially developed a comprehensive, scientific, independent and professional risk management system. From the beginning of this year, CCB launched the reform of risk management system throughout the bank, established the risk management mechanism of parallel working and vertical management between the customer managers and risk managers. Parallel working integrates the risk management into the whole process of business operation while vertical management of risks strengthens the leadership of the headquarters and allows the risk directors of different branches to directly report to the CRO. With the CRO at the headquarters, risk directors at primary branches, risk heads at secondary branches and risk managers at county-level sub-branches, the reporting matrix operates soundly. Currently, CCB is consolidating resources to build the new risk management system to cover all the risk aspects of commercial banks so as to guarantee the effective operation of modern corporate governance structure and improvement of core competitiveness.

 

Linkage for CVs of Mr. Pang Xiusheng and Mr. Zhu Xiaohuang

 

CV of Mr. Pang Xiusheng

Mr. Pang Xiusheng, Han nationality, was born in Zhaodong, Heilongjiang Province in May 1958. He is a senior economist and graduated from the Post Graduate Class of Harbin Institute of Technology majoring in Technology Economics. He started his career life in August 1980, and now is executive deputy director of the Asset and Liability Committee and general manager of the Restructuring Office of China Construction Bank Corporation (CCB).

Mr. Pang Xiusheng has served as the executive deputy director of the Asset and Liability Committee and general manager of the Restructuring Office of CCB since March 2006. Prior to that position, Mr. Zhang was director of the Restructuring Office of CCB from April 2005 to March 2006, general manager of Zhejiang branch of CCB from April 2003 to April 2005, deputy general manager and general manager of the Planning and Finance Department of CCB from October 1997 to April 2003, deputy director and deputy general manager of the Treasury Planning Department of CCB from September 1995 to October 1997 and deputy senior manager, senior manager of Planning Division of Heilongjiang branch of CCB from August 1980 to September 1995.

 

 

CV of Mr. Zhu Xiaohuang

Mr. Zhu Xiaohuang, Han nationality, was born in Cili county Hunan Province in July 1956. Mr. Zhu is a senior economist and graduated form Hubei University of Finance & Economics majoring in infrastructure finance and credit. He started his career life in March 1974 and now is executive deputy director of the Risk Management Committee of China Construction Bank Corporation (CCB).

Mr. Zhu Xiaohuang has served as the executive deputy director of the Risk Management Committee of CCB since March 2006. Prior to that position, Mr. Zhu was general manager of Corporate Banking Department from October 2004 to March 2006, general manager of Guangdong Branch of CCB from May 2001 to October 2004, general manager of Banking Department of CCB from March 1999 to May 2001, deputy general manager of Liaoning Branch of CCB from March 1997 to March 1999, deputy general manager of Credit Management Department of CCB from April 1996 to March 1997, deputy general manager of No.1 Credit Department from April 1995 to April 1996, and successively served as deputy senior manager, senior manager and deputy general manager in the Administrative Office of CCB from February 1982 to April 1995.