On May 21 2002 a new set of rules for standardized information disclosure was introduced by China's central bank the People's Bank of China (PBoC) to improve commercial banks' transparency. The introduction of the Commercial Banks Information Disclosure Tentative Procedures, which contain 31 articles in total and take effect immediately following promulgation, is seen as a further step taken by the PBoC in its effort to reform the banking sector and to reinforce market discipline for commercial banks, which are under enormous pressure from foreign competitors especially after China's entry into the WTO.
Under the Procedures, disclosure of key financial indicators reflecting the financial conditions of commercial banks is made compulsory. Commercial banks are required to compile annual reports, which should include information such as fiscal and accounting reports, various risk management conditions, asset quality, corporate governance and big events of the year, and should give in particular figures of capital adequacy ratios, asset quality and profits or losses. The annual report should be released before the end of April each year, and if the commercial bank is unable to release its annual report in time for any reasons, it should apply for an extension with the PBoC 15 days before the deadline.
While China's commercial banks publish annual reports, most of these reports do not include the key information requested by the Procedures. For example, the large amount of non-performing loans in the state-owned commercial banks inherited from the era of the planned economy is an open secret, but banks have not been required to make the actual figures public.
However, smaller banks whose total assets are under Rmb 1 billion ($120 million) or balance of deposit is below Rmb 50 million are not subject to the disclosure rules provided in the Procedures but are nevertheless encouraged to follow them.