Corporate Governance of Small- and Medium-Sized Commercial Banks: Original Intention of Design, Realistic Dilemma, and Breakthrough Route

Small- and medium-sized commercial banks constitute a fundamental component of the financial system, and their corporate governance plays a critical role in the modernization of financial governance. Over the past two decades, these banks have largely established a modern enterprise framework, typically structured around shareholders’ meetings, boards of directors, supervisory boards, and senior management (SBSS). This governance arrangement has supported sustained institutional growth; however, persistent challenges have emerged, including the accumulation of non-performing assets and the increasing frequency of risk events. These problems cannot be attributed solely to market or operational factors, but are also closely related to limitations in the top-level design and practical functioning of the SBSS governance structure. In particular, a notable gap exists between the original design objectives of the modern enterprise system and its actual governance outcomes in practice. This study adopts an institutional and analytical approach, supported by descriptive regulatory statistics, to examine governance deficiencies in small- and medium-sized commercial banks. By introducing French state-led governance culture as an institutional reference, the paper conceptualizes non-shareholder-centered governance arrangements under strong public involvement and proposes an embedded governance framework emphasizing accountability, supervision, and information integration.