Research On Corporate Governance Of Village Banks

The village bank is a common example in the process of Chinese financial reform deepening and leading the folk capital into the financial industry. The primary target of the village bank is providing financial support to solve the three problems related to agriculture. It not only relieves the shortage of capital, but also effectively makes up for the deficiency of financial services in rural areas.The village bank is a special financial company. The sound corporate management structure is necessary for a sustainable village bank. The village’s liabilities are high. In order to protect the legitimate interests of depositors and other stakeholders, the village bank has to be effectively managed to establish power restriction between the general meeting of shareholders, the board of directors, the board of supervisors and these senior managers. At the same time, the sound corporate governance help village bank making the most of advantages as a separate legal entity. Through a village banks’governance survey in western regions, the author found these weak points including the shortage of authoritative and targeted laws for village banks, the unreasonable structure of shares holders, the board of director’s serious functional bias, the board of supervisors’faulty assignments, the lack of professional committee, the inadequate protection of the interests of depositors, the weak risk management system, etc. Four suggestions are recommended for these problems related to village banks:To complete laws specialized to village banks. To improve the ownership structures through expanding the scope of sponsor and cancelling the limit of proportion. To improve the composition of the board of directors and the board of supervisors and to clarify their respective functions. To strengthen risk management through establishing the protective system for depositors’interests and credit risk management system.