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LESSONS:

People’s Republic of China: China Everbright Bank

| country: China, People’s Republic of

This validation fully agrees with the issues and lessons highlighted by the extended annual review report (XARR) including: (i) the importance of protecting ADB from investment losses through the use of put option or price adjustment mechanisms and the need for clarity in related documentation (with reference to the fact that neither the Shareholders’ Agreement nor the Subscription Agreement for ADB’s China Everbright Bank (CEB) investment specified the accounting standard to be used in calculating the net asset value on which the put option was based), and (ii) the limited role that a minority shareholder can play as an agent of change. In addition, this validation identifies the following lessons. Adequate due diligence is important for any ADB investment. Particular attention needs to be given to potential corporate governance issues and the risk of excessive intra-group lending in case a targeted financial institution is affiliated with other companies.

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