Public Notice of the CBRC on the Rules for Implementing the Regulations of
the People’s Republic of China on Administration of Foreign-funded Banks

For the purpose of meeting the needs of opening up to the outside world and economic development, strengthening and improving supervision of foreign-funded banks, and promoting soundness of the banking industry, the State Council promulgated the Regulations of the People’s Republic of China on Administration of Foreign-funded Banks (hereinafter referred to as the Regulations) on November11, 2006. Accordingly, the CBRC promulgated the Rules for Implementing the Regulations of the People’s Republic of China on Administration of Foreign-funded Banks (hereinafter referred to as the Rules) on November 24, 2006. Relevant issues upon the implementation of the Regulations and the Rules are herein announced as follows:

1. Effective on December 11, 2006, the geographic and clients restrictions on local currency business of foreign banks are to be removed. For local currency business in China, in accordance with the requirements as prescribed in the Regulations, foreign banks may expand their clients to Chinese citizens within the territory of China with no geographic restrictions.

2. The foreign bank branches having been approved to engage in local currency business with non-foreign-funded enterprises, after renewal of the business license, may receive a time deposit of no less than RMB1 million yuan for each time from the Chinese citizens within the territory of China in addition to the previous business scope. The detailed procedure is as follows: (1) the applicant submits the application letter addressed to the CBRC Chairman and signed by the chairman or the president (the CEO, the general manager) of the parent bank; (2) the applicant shall, by presenting the letter of conformation issued by the CBRC, renew its business license. Other foreign bank branches may apply for the local currency business as provided for in Article 31 of the Regulations in accordance with relevant requirements of the Regulations and the Rules. The wholly foreign-funded banks and the Chinese-foreign joint venture banks may apply for the local currency business as provided for in Article 29 of the Regulations in accordance with relevant requirements of the Regulations and the Rules.

3. The Wholly foreign-funded banks and the Chinese-foreign joint venture banks established before the promulgation of the Regulations, as well as the foreign bank branches that are not meeting the requirements of registered capital or operating capital as provided for in the Regulations and the Rules, may maintain the current amount of registered capital or operating capital if their clients range and business scope remain unchanged. Where a bank changes its shareholder, expand its client range or business scope, or establishes an additional business office, it shall replenish its registered capital or operating capital pursuant to the relevant requirements as provided for in the Regulations and the Rules.

4. A wholly foreign-funded bank converted from a foreign bank branch and solely funded by the parent bank, as well as the wholly foreign-funded bank and the Chinese-foreign joint venture bank established before the promulgation of the Regulations, shall, before December 31, 2011, meet the requirement provided for in the subparagraph (2) of Article 39 of the Law of the People’s Republic of China on Commercial Banks that the ratio of the balance of loans to the balance of deposits may not exceed 75 percent.

5. A wholly foreign-funded bank converted from a foreign bank branch and solely funded by the parent bank, as well as the wholly foreign-funded bank and the Chinese-foreign joint venture bank established before the promulgation of the Regulations, shall, before December 31, 2009, meet the requirements provided for in the subparagraph (4) of Article 39 of the Law of the People’s Republic of China on Commercial Banks that the ratio of the balance of loans to the same borrower to the balance of capital of the commercial bank may not exceed 10 percent. During such grace period, the total outstanding lending to an enterprise and its connected entities by a wholly foreign-funded bank or a Chinese-foreign joint venture bank shall not exceed 25% of its net balance of capital. This requirement, however, does not apply to the outstanding loans that are contracted between a foreign bank branch and its borrowers and are transferred to the wholly foreign-funded bank converted from the branch.

6. A wholly foreign-funded bank converted from a foreign bank branch and solely funded by the parent bank shall set up an independent and complete computer information management system in accordance with the requirements prescribed by the CBRC. If it fails to set up such a system, it shall meet the requirement within 2 years after the conversion.

7. The Regulations and the Rulesupon their promulgation, apply to a representative office of a foreign bank in China. The Rules on Administration of Representative offices of Foreign Financial Institutions in the People’s Republic of China promulgated by the People’s Republic of China on June 13, 2002 is no longer effective. According to the Regulations and the Rules, A wholly foreign-funded bank or a Chinese-foreign joint venture bank is not allowed to establish representative offices, and the supervision and administration of the representative offices established by a wholly foreign-funded bank or a Chinese-foreign joint venture bank before the promulgation of the Regulations shall be carried out in accordance with relevant provisions of the Regulations and the Rules.

A foreign bank converting its branch within the territory of China into a wholly foreign-funded bank is allowed to maintain its representative office within the territory of China, and its general representative office shall complete the procedures for closure upon the business commencement of the wholly foreign-funded bank. The general representative office of each of other foreign banks shall be closed before June 1, 2007, responsibilities of which shall be transferred into the branch designated as the administration branch by the parent bank.

8. The wholly foreign-funded foreign finance companies and the Chinese-foreign joint venture finance companies, which are not affiliated to enterprise groups and were established before the promulgation of the Regulations for the purpose of serving the public, shall complete the procedures of conversion or closure as soon as possible. The supervision of such finance companies by the CBRC within the period of their existence shall be subject to the same provisions as provided for in the Regulations and the Rules with respect to the supervision of wholly foreign-funded banks and the Chinese-foreign joint venture banks.

9. The CBRC will review and approve the applications submitted by foreign banks in accordance with relevant provisions of the Regulations and the Rules. The application submitted by a foreign bank before the promulgation of the Regulations remains effective, but additional documents shall be submitted according to relevant requirements as prescribed by the Regulations and the Rules.

10. A foreign bank establishing both a wholly foreign-funded bank and a branch, or establishing both a Chinese-foreign joint venture bank and a branch within the territory of China shall make adjustment to its operational establishments within the territory of China in accordance with the Regulations and the Rules as well as the relevant requirements prescribed by the CBRC.

11. A foreign bank that fails to meet the other newly revised supervisory and regulatory requirements provided for in the Regulations and the Rules shall satisfy these requirements before August 1, 2007.  

 

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Copyright: China Banking Regulatory Commission
ADDR:Jia N0.15 Financial Street, Xicheng District, Beijing, 100033