Abstract: The key to sustainable growth in banking lies in the Communist Party of China's (CPC) leadership and the refinement of internal governance mechanisms.Effectively preventing financial risks will significantly propel the banking sector towards high-quality development.Hence,it is crucial to actively explore how organizations of the CPC can engage in the governance structure of banks,and establish a governance model tailored to China's unique characteristics.Commercial banks face substantial information asymmetry and high regulatory costs,making refined internal governance mechanisms pivotal for risk management within these institutions.As the statutory procedures and mechanisms for CPC committee members to join corporate boards and senior management continue to improve,a “two-way entry and cross-serving” model emerges,forming a dual governance framework that blends “CPC-led governance” with “modern corporate governance”.

This paper summarizes the involvement of CPC organizations in the governance of 215 commercial banks from 2002 to 2020.In the context of economic policy uncertainty,this paper examines how the integration of CPC into governance through “two-way entry and cross-serving” affects risk prevention in banks.The findings suggest:Firstly,CPC's involvement significantly reduces banks' risk exposure by mitigating the adverse effects of economic policy uncertainty.Particularly,when the CPC committee's Secretary concurrently serves as the Chairman,this combination has a more pronounced impact on reducing bank risk compared to CPC committee members in supervisory and managerial roles.Secondly,CPC's “Three Importance and One Greatness” system,covering major issues,important appointments and removals,major projects,and the use of large amounts of money,displays proactive risk prevention features.Thus,during increased economic policy uncertainty,banks with CPC involvement in governance mitigate operational volatility,reducing risk exposure.This is evident in banks avoiding excessive liquidity hoarding and diversifying loans to decrease concentration,enhancing their capacity to serve entities.Thirdly,even after accounting for inherent influences by organizing and assessing martyrs' cemeteries and the number of martyrs in the banks' regions,the results remain significant.

The above results demonstrate that integrating CPC with bank governance effectively enhances the capability to serve financial entities.Continuing to refine the “two-way entry and cross-serving” leadership model proves crucial in bolstering risk prevention in the banking sector.It also adeptly counters the adverse impacts of rising global economic policy uncertainties on the financial system.

Therefore,this paper provides China's experience in preventing and resolving significant financial risks by integrating CPC with bank governance.In contrast to Western traditional corporate governance studies,this article combines China's institutional system,cultural background,and the centralized leadership of CPC in economic affairs to demonstrate that CPC involvement in bank governance aligns with the interests of the CPC and the people.Simultaneously,it effectively reduces principal-agent conflicts.Combining data and empirical analysis,the dual governance system integrating Party with corporate governance is scientifically and significantly essential for refining internal governance mechanisms within banks.It offers a new research perspective on bank governance and risk control.

CPC organizations embody a collectivist culture.Through the principle of “the Party assuming the responsibility for cardres' affairs”,these organizations can engage more deeply in supervising and managing processes within banks and even the entire financial sector,aligning well with China's reality.In the future,exploring the specific pathways of CPC organization involvement in governance and finding more scientific means to leverage this role will be crucial for better utilizing this unique system and enhancing internal governance mechanisms.