Say No to Non-conformity, IB Initiated Year of Improvement in Compliance and Internal Control

From March of 2017, a campaign entitled “‘IB Voyage’ Year of Improvement in Compliance and Internal Control 2017” (hereinafter referred to as “IB Voyage”) was started within IB Group.

Tao Yiping, the governor of IB serves as the head of the leading group. It is a campaign that says no to breach of regulation and covers over 50 thousand staff of IB, and it is aimed to strengthen the internal compliance philosophy of “internal control drives development and compliance creates value”, further consolidate the basis of management of compliance and internal control, and perfect IB’s long-term mechanism of compliance management.

Consolidate the basis with the culture of compliance

During this “IB Voyage” campaign, IB issued a letter of appeal concerning compliance to all staff which calls on “persevere in good professional ethics, practice the culture of compliance in all respects, develop firm awareness of basic principles, strictly implement the regulations, unswervingly bid farewell to breach of regulations”, and printed education and training brochures with warning cases, and widen the dissemination of the culture of compliance through various activities with “compliance” as the topic including “going to grassroots”, “mass discussion”, “large-scale forum” and “competitions”.

“The purpose of all activities is to consolidate the basis through the culture of compliance.” Hua Bing, GM of Department of Law and Compliance of IB, said. IB will center upon five guidelines including “disseminate the culture of compliance, optimize procedures and systems, find out risks and improve risk control, strengthen reform and responsibility investigation, and ensure the guarantee for compliance management resources”, carry out refined management, vigorously advocate corporate culture of compliance featuring strictly observing one's duty and shouldering one’s responsibility.

Taking this opportunity, IB is further strengthening enforcement of regulations, sorting out all regulations of the bank, re-examining whether all regulations are scientific, effective, complete and operational, and effectively pushing inspection of innovative businesses and products.

For instance, for key posts including heads of grass-root institutions, client managers of public credit, and managers of wealth management, sort out rules about what to know and what to do, and guide staff on key posts to understand prohibitions, limits and requirements of their posts. In order to fix loopholes of regulations and ensure all areas are under management, IB is scheming for an activity to “find out weakness, put forward suggestions and strengthen implementation”, so as to reinforce the final effect.

In addition, IB will carry out special governance focusing on “three arbitrages”—“regulatory arbitrage, idling arbitrage and linkage arbitrage, inappropriate incentives of performance examination, service charge, management of seals, risk control of inter-city institution, improvement in efficiency of examination and approval, protection of consumers’ rights, deviant behavior of staff as well as prevention and control of incidents, organize a group of legal compliance management, put in place a compliance management system covering all respects, and enhance management of internal control and compliance.

Mainstream banks should “obeying the rules”

Recently British magazine The Banker, an international authoritative media, and Brand Finance, a world-famous brand appraisal institution, released “2017 top 500 global banks” in which IB ranked 21st in terms of brand value, being among the mainstream banks.

For IB, only banks that obey the rules are mainstream banks.

“An important and basic feature of mainstream banks is obeying the rules. If a bank runs against all rules, it will lead to chaos and risk will be out of control. In that case it can not survive, let alone being called mainstream banks.” Tao Yiping, the governor of IB, said.

In recent years, IB has continued to strengthen management of “compliance”.

Boards with “Thirteen Prohibitions for Staff” can be seen everywhere in the office building of IB. In 2016, the bank drew up “Thirteen Prohibitions for Staff”, specifying “basic prohibition” and “top prohibition”. Over 50 thousand staffs have signed letters of promise. A series of publicity about compliance was organized, including 1343 trainings, 177 examinations and competitions and 325 activities for publicizing and implementation in grass-roots.

In order to reinforce management of staff behaviors, IB introduced a management philosophy of “full life circle” in whichcontrol of compliance is exerted on all periods of employment from being recruited to resignation or leaving his or her job.It incorporated background investigation prior to employment, professional ethics and rules for staff, rules beyond eight working hours and inspection of deviant behaviors of staff into common management of staff, and continued to create new ways to conduct monitoring and inspection of deviant behaviors of staff. For instance, in 2015, the bank launched alert platform for deviant behaviors of staff, which will give automatic warnings once deviant deals of staff broke the rules of the system; in 2016, the bank set up normal mechanism of “woodpecker” spot check for deviant behaviors of staff, to catch the rule-breaker.

Each staff of IB has an “ID page”. The “ID page” goes alongside the whole career of staff in IB, carrying important evidence concerning their job changes and performance examinations, such as rules breach points, all types of information about rules breach as well as rewards for compliance. In the meantime, in case that deviant behaviors may occur between staff who leave their posts and staff in office or clients, IB also attaches importance to “ID page” of staffs who leave their posts.

“Make reductions” to guarantee profits

Confronted with current tough economic situation, IB concedes that rigorous implementation of policies and tight control of business compliance can help a bank gain benefit from this round of transformation, otherwise it may encounter setbacks.

At present, IB’s compliance and internal control has entered a new phase. It set up a new mode of management of compliance and internal control which puts internal control and management of operational risks first, strengthens management of compliance and regulations, coordinates management of inspection and supervision, emphasizes monitoring and analysis of risks in compliance, and in which who breaks the rules must be blamed.

In recent years, IB has given full play to the commanding role of appraisal of compliance and internal control, and progressively established a multi-level appraisal system of compliance operation and internal control covering branches, business lines of head office, subsidiaries and overseas branches. It is reported that its appraisal of compliance and internal control mainly adopts positive incentives, guiding all departments to ensure compliance of the whole procedures at any time in addition to compliance of results. The bank also rigorously executes “veto power” over incidents involving major risks. Branches which rank among the last two positions in appraisal of compliance and internal control, or which involve major incidents about rules breach, acting beyond authority, causing risks or severe punishments throughout the year of appraisal will not be qualified to be rewarded in the annual comprehensive appraisal.

Furthermore, IB stresses that “strict compliance starts from leaders”. For example, results of appraisals and inspections of compliance and internal control are connected to performance examinations, appraisals and risk fund of leaders in branches; dual punishments are inflicted regarding major rules breach, namely, once major rules breach occurs, both the involving institution and its head will be blamed.

The bank created an integration of “three types of management”, i.e. compliance, internal control and operational risk, and reorganized the management chain of compliance, internal control and operational risk in key procedures. In 2016, it realized 2154 control points and installed 111 key indicators to conduct monitoring and analysis for 95 main procedures of the bank. It also continued to intensify inspection and supervision in key fields such as interbank business, notes, bonds and wealth management.

“In order to gain more profits from operation, a bank should learn to make both “increases” and “reductions”. Although management of compliance doesn’t generate profits directly, but it can effectively reduce costs of rules breach, and form core competitiveness, and is a vital guarantee for profits in fact,” said Hua Bing, GM of Department of Law and Compliance of IB.