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Promulgated by the State Council of the People's Republic of China on November 11, 2006 and effective as of December 11, 2006
Chapter I General Provisions
Article 1 These Regulations are formulated for the purposes of meeting the needs of opening up to the outside world and economic development, strengthening and improving supervision of foreign-funded banks, and promoting safe and sound operation of the banking industry.
Article 2 The term "foreign-funded bank" in these Regulations means any of the following institutions that are approved to establish within the territory of the People's Republic of China in accordance with relevant laws and regulations of the People's Republic of China:
(1) A wholly foreign-funded bank funded by a foreign bank on its own or jointly funded by a foreign bank with any other foreign financial institutions;
(2) A Chinese-foreign joint venture bank jointly funded by foreign financial institutions with Chinese companies or enterprises;
(3) A branch of a foreign bank; and
(4) A representative office of a foreign bank.
The institutions listed in subparagraphs (1) through (3) of the preceding paragraph are hereinafter referred to as operational foreign-funded banks.
Article 3 The term "foreign financial institution" in these Regulations means a financial institution that is registered outside the territory of the People's Republic of China and is approved or licensed by the financial regulatory authority of its home country or region.
The term "foreign bank" in these Regulations means a commercial bank that is registered outside the territory of the People's Republic of China and is approved or licensed by the financial regulatory authority of its home country or region.
Article 4 A foreign-funded bank shall abide by the laws and regulations of the People's Republic of China, and shall not harm the national, social and public interests of the People's Republic of China.
The legitimate activities and lawful rights and interests of a foreign-funded bank shall be protected by the laws of the People's Republic of China.
Article 5 The banking regulatory agency of the State Council and its local offices (hereinafter referred to as the banking regulatory agency) shall be responsible for the supervision of foreign-funded banks and their business activities. Where other supervisory departments or institutions that supervise foreign-funded banks and their business activities are specified in laws or regulations, such provisions shall prevail.
Article 6 The encouraging and guiding measures formulated by the banking regulatory agency of the State Council on the basis of the regional economic development strategy and other related policies of the State shall be implemented after submission to and approval by the State Council.
Chapter II Establishment and Registration
Article 7 Establishment of a foreign-funded bank and its branches shall be subject to examination and approval by the banking regulatory agency.
Article 8 The minimum registered capital for a wholly foreign-funded bank or a Chinese-foreign joint venture bank shall be 1 billion yuan or an equivalent amount in convertible currencies. The registered capital shall be paid-in capital.
Where a wholly foreign-funded bank or a Chinese-foreign joint venture bank establishes a branch within the territory of the People's Republic of China, the branch shall receive from its parent bank a non-callable allocation of not less than 100 million yuan or an equivalent amount in convertible currencies as its operating capital. The total amount of operating capital allocated from a wholly foreign-funded bank or a Chinese-foreign joint venture bank to all its branches shall be no more than 60 percent of the parent bank's aggregate capital.
A foreign bank branch shall receive from its parent bank a non-callable allocation of not less than 200 million yuan or an equivalent amount in convertible currencies as its operating capital.
The banking regulatory agency of the State Council may, by taking into account the business scope of an operational foreign-funded bank and the need of prudential supervision, increase the minimum requirement on the above-mentioned registered capital or operating capital, and determine the renminbi-denominated proportion of capital.
Article 9 The shareholder of a proposed wholly foreign-funded bank or a Chinese-foreign joint venture bank, and the foreign bank applying for establishing a branch or a representative office, shall satisfy the following requirements:
(1) Having persistent profit earning capacity, good reputation, and no record of material violation of laws or regulations;
(2) The shareholder of a proposed wholly foreign-funded bank, the foreign shareholder of a proposed Chinese-foreign joint venture bank, or the foreign bank applying for establishing a branch or a representative office, shall have the experience in the international financial activities;
(3) Having in place effective anti-money laundering systems;
(4) The shareholder of a proposed wholly foreign-funded bank, the foreign shareholder of a proposed Chinese-foreign joint venture bank, or the foreign bank applying for establishing a branch or a representative office shall be subject to effective supervision by the financial supervisory authority of its home country or region, and the application shall have been approved by the financial supervisory authority of its home country or region; and
(5) Other prudential requirements prescribed by the banking regulatory agency of the State Council.
The home country or region of the shareholder of a proposed wholly foreign-funded bank, the foreign shareholder of a proposed Chinese-foreign joint venture bank, or the foreign bank applying for establishing a branch or a representative office shall maintain a sound financial regulatory system, and the financial supervisory authority of such country or region has well established a supervisory cooperation mechanism with the banking regulatory agency of the State Council.
Article 10 The shareholder of a proposed wholly foreign-funded bank shall be a financial institution and satisfy the requirements provided in Article 9 of these Regulations. In addition, the sole shareholder or the controlling shareholder of a proposed wholly foreign-funded bank shall satisfy the following requirements:
(1) Being a commercial bank;
(2) Having maintained a representative office within the territory of the People's Republic of China for over two years;
(3) Having the total assets of not less than $10 billion at the end of the year prior to the submission of the application; and
(4) Having the capital adequacy ratio that meets the requirements prescribed by the financial supervisory authority of its home country or region and the banking regulatory agency of the State Council.
Article 11 The shareholder of a proposed Chinese-foreign joint venture bank shall satisfy the requirements provided in Article 9 of these Regulations. In addition, the foreign shareholder and the sole Chinese shareholder or the major Chinese shareholder shall be a financial institution, and the sole foreign shareholder or the major foreign shareholder shall also satisfy the following requirements:
(1) Being a commercial bank;
(2) Having maintained a representative office within the territory of the People's Republic of China;
(3) Having the total assets of not less than $10 billion at the end of the year prior to the submission of the application; and
(4) Having the capital adequacy ratio that meets the requirements prescribed by the financial supervisory authority of its home country or region and the banking regulatory agency of the State Council.
Article 12 A foreign bank that applies for establishing a branch shall satisfy the following requirements in addition to those provided in Article 9 of these Regulations:
(1) Having the total assets of not less than $20 billion at the end of the year prior to the submission of the application;
(2) Having the capital adequacy ratio that meets the requirements prescribed by the financial supervisory authority of its home country or region and the banking regulatory agency of the State Council; and
(3) Having maintained a representative office within the territory of the People's Republic of China for over two years where the foreign bank applies for establishing its first branch.
Article 13 A foreign bank that has already established an operational foreign-funded bank within the territory of the People's Republic of China shall not establish a new representative office if it has already maintained a representative office, with the exception of establishment of a representative office in the areas covered by the regional development strategy or other related policies of the state.
If a representative office is changed with approval into an operational foreign-funded bank, the foreign bank shall go through the procedures for cancellation of registration of the original representative office in accordance with law.
Article 14 Where applying for establishing an operational foreign-funded bank, the applicant shall first apply for the preparation of the bank and submit the following application documents to the banking regulatory agency in the place where the proposed bank is to be established:
(1) An application letter, including the name, location, registered capital or operating capital, and the business scope of the proposed bank;
(2) A feasibility study report;
(3) The draft articles of association of the proposed wholly foreign-funded bank or Chinese-foreign joint venture bank;
(4) The business contract signed by all shareholders of the proposed wholly foreign-funded bank or Chinese-foreign joint venture bank;
(5) Articles of association of the shareholder of the proposed wholly foreign-funded bank or Chinese-foreign joint venture bank or of the foreign bank applying for establishing a branch;
(6) The organizational chart, name list of major shareholders, overseas establishments and associated enterprises of the shareholder of the proposed wholly foreign-funded bank or Chinese-foreign joint venture bank or of the foreign bank applying for establishing a branch and its parent group;
(7) Annual reports for the recent three years of the shareholder of the proposed wholly foreign-funded bank or Chinese-foreign joint venture bank, or of the foreign bank applying for establishing a branch;
(8) Anti-money laundering systems adopted by the shareholder of the proposed wholly foreign-funded bank or Chinese-foreign joint venture bank, or by the foreign bank applying for establishing a branch;
(9) Photocopies of the business license or the financial services permit, and the written opinions on the application issued by the financial regulatory authority of the home country or region of the shareholder of the proposed wholly foreign-funded bank, or of the foreign shareholder of the proposed Chinese-foreign joint venture bank, or of the foreign bank applying to establish a branch; and
(10) Other documents specified by the banking regulatory agency of the State Council.
The banking regulatory agency in the place where the proposed bank is to be established shall submit the application documents together with its examination opinion to the banking regulatory agency of the State Council in due time.
Article 15 The banking regulatory agency of the State Council shall, within six months from the date of receiving the complete application documents required for the preparation for an operational foreign-funded bank, make a decision to approve or not to approve the preparation application and notify the applicant of such decision in writing; if deciding not to approve the preparation application, it shall give the reasons thereof.
Where, in special circumstances, the banking regulatory agency of the State Council cannot complete the examination and make a decision to approve or not to approve the preparation application within the time limit prescribed in the preceding paragraph, it may appropriately extend the examination time limit and shall notify the applicant of the extension in writing; however, the extended time limit shall not exceed three months.
The applicant shall, by presenting the approval document for the preparation, obtain an application form for business commencement from the banking regulatory agency in the place where the proposed bank is to be established.
Article 16 The applicant shall complete the preparation of the proposed bank within six months from the date of obtaining the approval for preparation. Where the applicant fails to complete the preparation within the prescribed time limit, it shall provide the reasons thereof; and with the approval by the banking regulatory agency in the place where the proposed bank is to be established, the applicant may extend the preparation period for three months. Where the applicant fails to complete the preparation within the extended period, the decision of approval for the preparation issued by the banking regulatory agency of the State Council shall automatically become void.
Article 17 Upon completing the preparation and passing the preparation inspection, the applicant shall submit the completed application form for business commencement and the following documents to the banking regulatory agency in the place where the proposed bank is to be established:
(1) The name list and curriculums vitae of the principal persons-in-charge of the proposed bank;
(2) The power of attorney to the proposed principal persons-in-charge of the bank;
(3) The capital verification certificate issued by a statutory capital verification agency;
(4) Documentation on security precautions and other business-related facilities;
(5) A guaranty letter issued by the foreign bank establishing a branch, stating that it shall be responsible for all the taxes and other indebtednesses the proposed branch will incur; and
(6) Other documents required by the banking regulatory agency of the State Council.
The banking regulatory agency in the place where the proposed bank is to be established shall submit the application documents together with its examination opinion to the banking regulatory agency of the State Council in due time.
Article 18 The banking regulatory agency of the State Council shall, within two months from the date of receiving the complete application documents for business commencement, make a decision to approve or not to approve the application for business commencement and notify the applicant of such decision in writing. If deciding to approve the application for business commencement, it shall issue a financial services permit; if deciding not to approve the application for business commencement, it shall give the reasons thereof.
Article 19 An approved operational foreign-funded bank shall, by presenting its financial services permit, register with the administrative department for industry and commerce and obtain a business license.
Article 20 To establish a foreign bank representative office, the applicant shall submit the following application documents to the banking regulatory agency in the place where the proposed representative office is to be established:
(1) An application letter, including the name and location of the proposed representative office;
(2) A feasibility study report;
(3) Articles of association of the applicant;
(4) Organizational chart, name list of major shareholders, overseas branches and associated enterprises of the applicant and its group;
(5) The applicant's annual reports for the recent three years;
(6) Anti-money laundering systems of the applicant;
(7) Photocopies of the personal identification, academic degree certificate and curriculum vitae of the appointed chief representative, as well as his statement of a clean record;
(8) The power of attorney to the appointed chief representative;
(9) Photocopies of the business license or financial services permit issued by the financial regulatory authority of the applicant's home country or region, and its written opinions on the application; and
(10) Other documents specified by the banking regulatory agency of the State Council.
The banking regulatory agency in the place where the proposed representative office is to be established shall submit the application documents, together with its examination opinion, to the banking regulatory agency of the State Council in due time.
Article 21 The banking regulatory agency of the State Council shall, within six months from the date of receiving the complete application documents for establishing a representative office by a foreign bank, make a decision to approve or not to approve the application for its establishment and notify the applicant of such decision in writing. If deciding not to approve the application for its establishment, it shall give the reasons thereof.
Article 22 An approved foreign bank representative office shall, by presenting the approval document, register with the administrative department for industry and commerce and obtain a business registration certificate.
Article 23 The documents listed in Articles 14, 17 and 20 of these Regulations, with the exception of the annual reports, if prepared in a foreign language, shall be submitted together with a Chinese translation thereof.
Article 24 A foreign bank, with the approval of the banking regulatory agency of the State Council, may change any of its branches established within the territory of the People's Republic of China into a wholly foreign-funded bank solely funded by its parent bank, under the principles of legitimacy, prudence and business continuity. The applicant shall file an application for establishing a wholly foreign-funded bank in accordance with the conditions, procedures and application document requirements prescribed by the banking regulatory agency of the State Council.
Article 25 If a foreign bank branch changes into a wholly foreign-funded bank solely funded by its parent bank, such foreign bank may, with the approval of the banking regulatory agency of the State Council, maintain one branch undertaking foreign exchange wholesale business within the prescribed time limit. The applicant shall file an application for such branch in accordance with the conditions, procedures and application document requirements prescribed by the banking regulatory agency of the State Council.
The term "foreign exchange wholesale business" in the preceding paragraph means the foreign exchange business provided to the customers other than individuals.
Article 26 The directors, senior executives and the chief representative of a foreign-funded bank shall meet the qualification requirements prescribed by the banking regulatory agency of the State Council, and their qualifications shall be subject to examination by the banking regulatory agency of the State Council.
Article 27 A foreign-funded bank shall, under any of the following circumstances, be subject to the approval by the banking regulatory agency of the State Council, and shall submit application documents in accordance with relevant requirements to register with the administrative department for industry and commerce in accordance with law:
(1) Changing registered capital or operating capital;
(2) Changing the bank's name, or business or office premises;
(3) Making adjustment to the scope of business;
(4) Changing shareholders or their equity of stock holdings;
(5) Making amendments to the articles of association; or
(6) Any other circumstances prescribed by the banking regulatory agency of the State Council.
Where a foreign-funded bank replaces its directors, senior executives or the chief representative, it shall report the appointments to the banking regulatory agency of the State Council for approval of qualifications.
Article 28 Where a foreign-funded bank or a Chinese-foreign joint venture bank changes its shareholder, the new shareholder shall satisfy the requirements for the shareholder provided in Articles 9, 10 or 11 of these Regulations.
In special circumstances, the new shareholder may be exempted from the provisions of subparagraph (2) of Article 10 or subparagraph (2) of Article 11 of these Regulations with the consent of the banking regulatory agency of the State Council.
Chapter III Scope of Business
Article 29 A wholly foreign-funded bank or a Chinese-foreign joint venture bank may, in accordance with the scope of business approved by the banking regulatory agency of the State Council, engage in part or all of the following foreign exchange and renminbi businesses:
(1) Receiving deposits from the general public;
(2) Granting short-term, medium-term and long-term loans;
(3) Handling acceptance and discounting of negotiable instruments;
(4) Buying and selling government bonds and financial bonds, as well as buying and selling foreign currency securities other than stocks;
(5) Providing letter of credit services and guaranty;
(6) Handling domestic and foreign settlement;
(7) Buying and selling foreign exchange and acting as an agent for the purchase and sale of foreign exchange;
(8) Acting as an agent for insurance companies;
(9) Engaging in inter-bank lending;
(10) Engaging in bank card business;
(11) Providing safe deposit box services;
(12) Providing credit information services and consultancy services; and
(13) Other businesses approved by the banking regulatory agency of the State Council.
A wholly foreign-funded bank or a Chinese-foreign joint venture bank may, with the approval of the People's Bank of China, engage in foreign exchange settlement and sale businesses.
Article 30 A branch of a wholly foreign-funded bank or a Chinese-foreign joint venture bank shall conduct business within the business scope authorized by its parent bank and the branch's civil liabilities shall be borne by its parent bank.
Article 31 A foreign bank branch may, in accordance with the scope of business approved by the banking regulatory agency of the State Council, engage in part or all of the following foreign exchange businesses, and renminbi businesses provided to customers other than Chinese citizens within the territory of China:
(1) Receiving deposits from the general public;
(2) Granting short-term, medium-term and long-term loans;
(3) Handling acceptance and discounting of negotiable instruments;
(4) Buying and selling government bonds and financial bonds, as well as buying and selling foreign currency securities other than stocks;
(5) Providing letter of credit services and guaranty;
(6) Handling domestic and foreign settlements;
(7) Buying and selling foreign exchange and acting as an agent for the purchase and sale of foreign exchange;
(8) Acting as an agent for insurance companies;
(9) Engaging in inter-bank lending;
(10) Providing safe deposit box services;
(11) Providing credit information services and consultancy services; and
(12) Other businesses approved by the banking regulatory agency of the State Council.
A foreign bank branch may receive a time deposit of not less than 1 million yuan for each time from the Chinese citizens within the territory of China.
A foreign bank branch may, with the approval by the People's Bank of China, engage in foreign exchange settlement and sale businesses.
Article 32 Civil liabilities of a foreign bank branch and its sub-branches shall be borne by its parent bank.
Article 33 A foreign bank representative office may engage in the non-operational activities relating to the businesses of the foreign bank it represents, including, among other activities, liaison, market research and consulting activities.
Civil liabilities incurred by a foreign bank representative office in its activities shall be borne by the foreign bank it represents.
Article 34 An operational foreign-funded bank applying to engage in the types of renminbi businesses within the scope of business as prescribed in Article 29 or 31 of these Regulations, shall satisfy the following requirements and be subject to the approval by the banking regulatory agency of the State Council:
(1) Having opened business within the territory of the People's Republic of China for at least three years prior to the application;
(2) Having been profitable for two consecutive years prior to the application; and
(3) Other prudential requirements prescribed by the banking regulatory agency of the State Council.
Where a foreign bank branch changes into a wholly foreign-funded bank solely funded by its parent bank, the time limit as prescribed in subparagraphs (1) and (2) of the preceding paragraph shall be calculated starting from the date when the foreign bank branch is established.
Chapter IV Supervision
Article 35 An operational foreign-funded bank shall, in accordance with relevant provisions, develop the operating rules, improve management systems for risk management and internal control, and ensure the compliance with such rules, policies and procedures.
Article 36 An operational foreign-funded bank shall comply with the unified accounting rules of the state and the provisions of the banking regulatory agency of the State Council on information disclosure.
Article 37 An operational foreign-funded bank shall comply with the relevant provisions of the state when issuing external debts.
Article 38 An operational foreign-funded bank shall determine its deposit and loan interest rates and the rates of various service fees in accordance with the relevant provisions.
Article 39 An operational foreign-funded bank to engage in deposit-taking business shall deposit required reserves in accordance with the provisions of the People's Bank of China.
Article 40 A wholly foreign-funded bank or Chinese-foreign joint venture bank shall comply with the asset/liability ratio requirement prescribed in the Law of the People's Republic of China on Commercial Banks. A wholly foreign-funded bank changed from a foreign bank branch and solely owned by its parent bank, or a wholly foreign-funded bank or Chinese-foreign joint venture bank established before these Regulations take effect shall, where its asset/liability ratio fails to meet the requirement, satisfy such requirement within the time frame prescribed by the banking regulatory agency of the State Council.
The banking regulatory agency of the State Council shall have the power to require a wholly foreign-funded bank or Chinese-foreign joint venture bank identified with high risks or weak risk management to increase its capital adequacy ratio.
Article 41 An operational foreign-funded bank shall draw loan loss reserves in accordance with relevant provisions.
Article 42 A wholly foreign-funded bank or Chinese-foreign joint venture bank shall comply with the provisions of the banking regulatory agency of the State Council on corporate governance.
Article 43 A wholly foreign-funded bank or Chinese-foreign joint venture bank shall comply with the provisions of the banking regulatory agency of the State Council on connected transactions.
Article 44 Thirty percent of the operating capital of a foreign bank branch shall be maintained in the form of interest-bearing assets required by the banking regulatory agency of the State Council.
Article 45 A foreign bank branch's renminbi operating capital plus renminbi reserves shall be no less than 8 percent of the branch's renminbi risk assets.
The banking regulatory agency of the State Council shall have the power to require a foreign bank branch identified with high risk and weak risk management to increase the ratio set forth in the preceding paragraph.
Article 46 A foreign bank branch shall ensure the liquidity of its assets. The ratio of its current assets to its current liabilities shall be no less than 25 percent.
Article 47 A foreign bank branch's total domestic assets denominated in both renminbi and foreign currencies shall be no less than its total domestic liabilities denominated in both renminbi and foreign currencies.
Article 48 A foreign bank that establishes two or more branches in the territory of the People's Republic of China shall designate one of these branches for the overall management of all the other branches.
The banking regulatory agency of the State Council shall conduct consolidated supervision over the branches established by a foreign bank within the territory of the People's Republic of China.
Article 49 An operational foreign-funded bank shall, in accordance with the relevant provisions of the banking regulatory agency of the State Council, report to the local banking regulatory agency on the cross-border funds movement and assets transfer of a large amount.
Article 50 The banking regulatory agency of the State Council shall, in light of the risk profile of an operational foreign-funded bank, have the power to take such special supervisory measures as issuing an order to suspend part of its business or replace its senior executives.
Article 51 An operational foreign-funded bank shall hire an accounting firm established within the territory of People's Republic of China to audit the bank's financial reports, and shall report such hiring decision to the local banking regulatory agency. Where the hiring contract is terminated, the reasons therefore shall be presented.
Article 52 An operational foreign-funded bank shall, in accordance with relevant provisions, submit its financial and accounting reports, statements and other relevant data to the banking regulatory agency.
The representative office of a foreign bank shall, in accordance with relevant provisions, submit relevant data to the banking regulatory agency.
(to be continued)
(Source: www.cbrc.gov.cn)
Documents will be only available to domestic subscribers of Beijing Review as of No.1 of 2007
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