(Adopted at the 50th Executive Meeting of the State Council on December 12, 2001, promulgated by Decree No.340 of the State Council of the People's Republic of China on December 20, 2001, and effective as of February 1, 2002)
Chapter I General Provisions
Article 1These Regulations are formulated for the purposes of meeting the needs of opening up to the outside world and economic development, strengthening and improving the administration of foreign-funded financial institutions, and promoting stable and sound operation of the banking industry.
Article 2As used in these Regulations, "a foreign-funded financial institution" refers to any of the following financial institutions that are incorporated and engaged in business operations within Chinese territory upon approval in accordance with the provisions of the relevant laws and regulations of the People's Republic of China:
(1) a foreign-capital bank with its headquarters incorporated within Chinese territory (hereinafter referred to as a solely-foreign-funded bank);
(2) a branch incorporated within Chinese territory by a foreign bank (hereinafter referred to as a foreign bank branch);
(3) a bank with joint capital operated within Chinese territory by a foreign financial institution jointly with any Chinese company or enterprise (hereinafter referred to as a joint-equity bank);
(4) a finance company with foreign capital whose head office is domiciled within Chinese territory (hereinafter referred to as a solely-foreign-funded finance company); or
(5) a finance company with joint capital operated within Chinese territory by a foreign financial institution jointly with any Chinese company or enterprise (hereinafter referred to as a joint-equity finance company).
Article 3Foreign-funded financial institutions shall abide by the laws and regulations of the People's Republic of China, and may not harm the social and public interests of the People's Republic of China.
The legitimate business activities and lawful rights and interests of foreign-funded financial institutions are protected by the laws of the People's Republic of China.
Article 4The People's Bank of China is the competent organ for administration and supervision of foreign-funded financial institutions; and the branch offices of the People's Bank of China shall exercise routine supervision and regulation of foreign-funded financial institutions under their jurisdiction.
Chapter II Incorporation and Registration
Article 5The minimum registered capital for a solely-foreign-funded bank or a joint-equity bank shall be the amount of freely convertible currencies equivalent to Renminbi 300 million yuan. The minimum registered capital for a solely foreign-funded finance company or a joint-equity finance company shall be the amount of freely convertible currencies equivalent to Renminbi 200 million yuan. The registered capital shall be paid-up capital.
A foreign bank branch shall receive from its head office non-callable allocation of freely convertible currencies equivalent to an amount of not less than Renminbi 100 million yuan as its operating capital.
The People's Bank of China may, on the basis of the business scope of a foreign-funded financial institution and the need of prudential supervision, increase the minimum requirement for its registered capital or operating capital, and determine the portion of capital or funds in Renminbi.
Article 6To incorporate a solely foreign-funded bank or a solely foreign-funded finance company, the applicant shall satisfy the following requirements:
(1) the applicant is a financial institution;
(2) the applicant has maintained a representative office within Chinese territory for over two years;
(3) the total assets of the applicant at the end of the year prior to the submission of such an application shall not be less than US$ 10 billion;
(4) the home country or region of the applicant maintains a sound system in respect of financial supervision and supervision, and the applicant is subject to effective supervision of the relevant regulatory authorities in its home country or region;
(5) the relevant regulatory authorities in the home country or region of the applicant has approved its application;
(6) other prudential requirements prescribed by the People's Bank of China.
Article 7To incorporate a foreign bank branch, the applicant shall satisfy the following requirements:
(1) the applicant has maintained a representative office within Chinese territory for over two years;
(2) the total assets of the applicant at the end of the year prior to the submission of such an application shall not be less than US$ 20 billion, and the capital adequacy ratio shall not be lower than 8 per cent;
(3) the home country or region of the applicant maintains a sound system in respect of financial supervision and supervision, and the applicant is subject to effective supervision of the relevant regulatory authorities in its home country or region;
(4) the relevant regulatory authorities in the home country or region of the applicant has approved its application;
(5) other prudential requirements prescribed by the People's Bank of China.
Article 8To incorporate a joint-equity bank or a joint-equity finance company, the applicant shall satisfy the following requirements:
(1) the foreign party to the bank or company is a financial institution;
(2) the foreign party to the bank or company has set up a representative office within Chinese territory;
(3) the total assets of the foreign party to the bank or company at the end of the year prior to the submission of such an application shall not be less than US$ 10 billion;
(4) the home country or region of the foreign party to the bank or company maintains a sound system in respect of financial supervision and supervision, and the foreign party to the bank or company is subject to effective supervision of the relevant regulatory authorities in its home country or region;
(5) the relevant regulatory authorities in the home country or region of the foreign party to the bank or company has approved its application;
(6) other prudential requirements prescribed by the People's Bank of China.
Article 9To incorporate a solely foreign-funded bank or a solely foreign-funded finance company, the applicant shall make a written application to the People's Bank of China and submit the following documents:
(1) a written application for the incorporation of the solely foreign-funded bank or the solely foreign-funded finance company, which shall include the name of the proposed solely foreign-funded bank or the solely foreign-funded finance company, the registered capital, and the types of business operations the bank or the company applies to engage in, etc.;
(2) a feasibility study report;
(3) the articles of association of the proposed solely foreign-funded bank or the solely foreign-funded finance company;
(4) the business licence (photocopy) issued by the relevant competent regulatory authorities of the home country or region of the applicant and a written opinion of the authorities on its application;
(5) the annual reports of the applicant for the last three successive years; and
(6) other data to be submitted as required by the People's Bank of China.
Article 10To incorporate a foreign bank branch, the head office of the foreign bank shall make a written application to the People's Bank of China and submit the following documents:
(1) a written application duly signed by the legal representative, which shall include the name of the proposed foreign bank branch, the amount of the non-callable operating capital allocated by the head office, and the types of business operations the foreign bank branch applies to engage in, etc.;
(2) a feasibility study report;
(3) the business licence (photocopy) issued by the competent regulatory authorities concerned in the home country or region of the applicant and a written opinion of the authorities on its application;
(5) the annual reports of the applicant for the last three successive years; and
(6) other data to be submitted as required by the People's Bank of China.
Article 11To incorporate a joint-equity bank or a joint-equity finance company, all the parties thereto shall jointly make a written application to the People's Bank of China and submit the following documents:
(1) a written application for the incorporation of the proposed joint-equity bank or the proposed joint-equity finance company, which shall include the name of the proposed joint-equity bank or the proposed joint-equity finance company, the name of each investing party thereto, the amount of the registered capital, the respective percentage of contributions by the parties, and the types of business operations the proposed joint-equity bank or the proposed joint-equity finance company applies to engage in, etc.;
(2) a feasibility study report;
(3) the contract for joint-equity operation, and the articles of association of the proposed joint-equity bank or the proposed joint-equity finance company;
(4) the business licence (photocopy) issued by the competent regulatory authorities concerned in the home country or region of the foreign party and a written opinion of the authorities on its application;
(5) the annual reports of the foreign party for the last three successive years;
(6) relevant data about the Chinese party; and
(7) other data to be submitted as required by the People's Bank of China.
Article 12The documents listed in Articles 9, 10 and 11 of these Regulations, with the exception of the annual reports, if written in a foreign language, shall be submitted together with a Chinese translation thereof.
Article 13The People's Bank of China shall conduct a preliminary examination of the application for incorporation of a foreign-funded financial institution, and shall, within six months from the date of receipt of complete application documents, decide whether or not to accept the application. If it decides to accept the application, it shall issue a formal application form to the applicant; if it decides to reject the application, it shall notify the applicant in writing and give the reasons therefor.
Where, in special circumstances, the People's Bank of China cannot complete the preliminary examination and decide whether or not to accept the application within the time limit provided for in the preceding paragraph, the time limit may be appropriately extended and the applicant shall be notified of the extension; the extended period, however, shall not be over three months.
Article 14The applicant shall, within six months from the date of receipt of the formal application form, complete the preparation for the establishment of the new institution. If failing to accomplish the preparation work within the given time limit with a proper reason, the applicant may, subject to the approval of the People's Bank of China, be given an extension for three months. Where the preparatory work has not been accomplished even after the extended period expires, the decision of acceptance made by the People's Bank of China shall automatically become invalid. After accomplishing the preparation work, the applicant shall submit the completed application form, together with the following documents, to the People's Bank of China for approval:
(1) a list of the principal persons in charge of the proposed foreign-funded financial institution and their respective curriculum vitae;
(2) powers of attorney granted to the proposed principal persons in charge of the foreign-funded financial institution;
(3) a capital verification certificate issued by a statutory capital verification organization;
(4) data of security and precautious measures and other business-related facilities;
(5) in the case of incorporation of a foreign bank branch, a bond issued by the head office guaranteeing the tax and debt obligations of the branch; and
(6) other documents to be submitted as required by the People's Bank of China.
Article 15The People's Bank of China shall, within two months from the date of receipt of the complete and formal application documents for the incorporation of a foreign-funded financial institution, make a decision of approval or disapproval of the application. If a decision of approval is made, it shall issue a license for conducting financial business to the applicant; if a decision of disapproval is made, it shall notify the applicant in writing and give the reasons therefor.
Article 16Where the establishment of a foreign-funded financial institution is approved, the applicant shall, on the strength of the license for conducting financial business, register with the administration department of industry and commerce for a business license.
Chapter III Scope of Business
Article 17A solely foreign-funded bank, a foreign bank branch or a joint-equity bank may, in accordance with the scope of business approved by the People's Bank of China, engage in part or all of the following business operations:
(1) taking in deposits from the general public;
(2) granting short-term, medium-term and long-term loans;
(3) handling acceptance and discount of negotiable instruments;
(4) buying and selling government bonds and financial bonds, and 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) exchange of foreign currencies;
(9) inter-bank lending;
(10) bank card business;
(11) providing safe deposit box services;
(12) providing credit and financial standing investigation and consultancy services; and
(13) other business operations approved by the People's Bank of China.
Article 18A solely foreign-funded finance company or a joint-equity finance company may, in accordance with the scope of business approved by the People's Bank of China, engage in part or all of the following business operations:
(1) taking in deposits, each of which shall be no less than Renminbi one million yuan or the equivalence in a freely convertible foreign currency, with maturity of at least three months;
(2) granting short-term, medium-term and long-term loans;
(3) handling acceptance and discount of negotiable instruments;
(4) buying and selling government bonds and financial bonds, and buying and selling foreign currency securities other than stocks;
(5) providing guaranty;
(6) buying and selling foreign exchange and acting as an agent for the purchase and sale of foreign exchange;
(7) inter-bank lending;
(8) providing credit and financial standing investigation and consultancy services;
(9) providing foreign exchange trust services; and
(10) other business operations approved by the People's Bank of China.
Article 19The geographical coverage for the Renminbi business undertaken by foreign-funded financial institutions, and the scope of customers to whom such services are to be provided, shall be verified and determined by the People's Bank of China in accordance with the relevant provisions.
Article 20To conduct Renminbi business, a foreign-funded financial institution shall satisfy the following requirements:
(1) it has operated in Chinese territory for at least three years prior to the application;
(2) it has been making profits for the two consecutive years prior to the application; and
(3) other prudential requirements prescribed by the People's Bank of China.
Article 21Where a foreign-funded financial institution intends to operate a new type of business within the scope of business approved by the People's Bank of China, it shall submit a written application to the People's Bank of China prior to the operation. The People's Bank of China shall, within sixty days from the date of receipt of the written application, make a decision of approval or disapproval. Where the People's Bank of China makes a decision of disapproval, it shall notify the applicant in writing and give the reasons therefor.
Chapter IV Supervision and Regulation
Article 22The interest rates of deposits and loans and the rates of various service fees of a foreign-funded financial institution shall be determined by itself in accordance with the relevant provisions of the People's Bank of China.
Article 23Foreign-funded financial institutions that intend to engage in deposit-taking business shall deposit required reserves with local branch offices of the People's Bank of China, and the ratio thereof shall be determined, and adjusted when necessary, by the People's Bank of China.
Article 24Thirty per cent of the operating capital of a foreign bank branch shall be maintained in the form of interest-bearing assets as prescribed by the People's Bank of China, including the deposits with banks designated by the People's Bank of China.
Article 25The capital adequacy ratio for solely foreign-funded banks, joint-equity banks, solely foreign-funded finance companies and joint-equity finance companies shall not be less than eight per cent.
Article 26The total outstanding lending to any one enterprise and its associated enterprises by a solely foreign-funded bank, a joint-equity bank, a solely foreign-funded finance company or a joint-equity finance company shall not exceed twenty-five per cent of its capital, unless otherwise approved by the People's Bank of China.
Article 27The fixed assets owned by a solely foreign-funded bank, a joint-equity bank, a solely foreign-funded finance company or a joint-equity finance company shall not exceed forty per cent of its equity.
Article 28The ratio of the share of Renminbi assets in its capital to the share of Renminbi assets in its risk assets shall not be less than eight per cent for any solely foreign-funded bank, joint-equity bank, solely foreign-funded finance company or joint-equity finance company.
For a foreign bank branch, the ratio of the share of Renminbi assets in the total amount of its operating capital plus reserves to the share of Renminbi assets in its risk assets shall not be less than eight per cent.
The People's Bank of China shall, in accordance with the relevant provisions, adjust the ratios set forth in the preceding two paragraphs step by step.
Article 29Foreign-funded financial institutions shall ensure the liquidity of their assets. The ratio of current assets to current liabilities shall not be less than twenty-five per cent.
Article 30The total amount of foreign exchange deposits taken within Chinese territory by a foreign-funded financial institution shall not exceed seventy per cent of its total foreign exchange assets within Chinese territory.
The People's Bank of China shall, in accordance with the relevant provisions, have the ratios laid down in the preceding paragraph adjusted step by step.
Article 31Foreign-funded financial institutions shall make provisions for loan loss (bad debt) reserves in accordance with the relevant provisions.
Article 32Foreign-funded financial institutions shall appoint Chinese certified public accountants and such appointments shall be subject to confirmation by the local branch offices of the People's Bank of China.
Article 33A foreign-funded financial institution shall, under any of the following circumstances, be subject to the approval by the People's Bank of China, and shall go through relevant formalities for registration with the administrative department for industry and commerce in accordance with the law:
(1) establishing a branch office;
(2) adjusting or transferring registered capital, or, increasing or decreasing operating capital;
(3) changing the institution's name or business premises;
(4) adjusting the scope of business;
(5) changing shareholders holding ten per cent or more of the total capital or total amount of shares;
(6) making revisions to the articles of association;
(7) replacing a senior executive; and
(8) any other circumstances prescribed by the People's Bank of China.
Article 34Foreign-funded financial institutions shall, in accordance with the relevant provisions, submit their financial statements and relevant documents to the People's Bank of China and its branch offices concerned.
Article 35The People's Bank of China and its branch offices shall have the power to, on a regular or ad hoc basis, inspect and audit deposits, loans, settlements and bad loans, etc. of foreign-funded financial institutions, demand foreign-funded financial institutions to submit relevant documents, materials and written reports within a specified period of time, and to punish or deal with, according to law, the acts committed by foreign-funded financial institutions in violation of laws or rules.
Article 36The People's Bank of China and its branch offices shall have the right to require foreign financial institutions to formulate their operating rules in pursuance of pertinent provisions, and establish and improve the systems for business management, for cash control, and for security and precautions.
Article 37Foreign-funded financial institutions shall accept the supervision and examination legally carried out by the People's Bank of China and its local branch offices, shall truthfully submit documents, materials and written reports and shall not refuse or hamper the supervision or examination or conceal such information.
Chapter V Dissolution and Liquidation
Article 38In the case of voluntary termination of its business activities, a foreign-funded financial institution shall, 30 days prior to the date of the termination, submit a written application to the People's Bank of China and shall, upon the examination and approval by the People's Bank of China, effect its dissolution and proceed to the liquidation.
Article 39In the event that a foreign-funded financial institution is insolvent, the People's Bank of China may order it to suspend its business and to clear its liabilities within a specified period of time. Where, within the specified period of time, such an institution recovers its solvency and intends to resume its business, it shall make an application to the People's Bank of China for the resumption of its business; where it fails to recover its solvency when the specified period of time is due, it shall effect its liquidation.
Article 40Where a foreign-funded financial institution is terminated because of dissolution, closure by law or declaration of bankruptcy, the specific matters relating to liquidation shall be dealt with by reference to the relevant provisions of laws and regulations of China.
Article 41Upon completion of the liquidation of a foreign-funded financial institution, the cancellation of registration shall be completed with the original registration authority within the statutory period of time.
Chapter VI Legal Liability
Article 42Any foreign-funded financial institutions established without the approval of the People's Bank of China, or illegally undertaking financial business, shall be closed down by the People's Bank of China, and criminal liability shall be investigated for in accordance with the relevant provisions of the criminal law on the crime of establishment of financial institutions without approval, the crime of illegally taking in deposits from the general public, or on any other crime; where the case is not serious enough for criminal punishment, the People's Bank of China shall have the illegal income confiscated and impose concurrently a fine of not less than one time but not more than five times the illegal income, or, if there is no illegal income or the illegal income is less than 100, 000 yuan, a fine of not less than 100,000 yuan but not more than 500, 000 yuan shall be imposed.
Article 43Where a foreign-funded financial institution conducts financial business beyond the scope of business, the geographical coverage or the scope of customers to whom its services are to be provided, which have been approved by the People's Bank of China, criminal liability shall be investigated for in accordance with the relevant provisions of the criminal law on the crime of illegal business operation, or on any other crime; where the case is not serious enough for criminal punishment, the People's Bank of China shall give it a disciplinary warning, have the illegal income confiscated and impose concurrently a fine of not less than one time but not more than five times the illegal income, or, if there is no illegal income or the illegal income is less than 100, 000 yuan, a fine of not less than 100,000 yuan but not more than 500, 000 yuan shall be imposed.
Article 44Where a foreign-funded financial institution, without approval, operates a new type of business within the scope of business approved by the People's Bank of China, the People's Bank of China shall order it to stop the operation of the new type of business not being approved, have the illegal income confiscated and impose concurrently a fine of not less than one time but not more than three times the illegal income, or, if there is no illegal income or the illegal income is less than 50, 000 yuan, a fine of not less than 50,000 yuan but not more than 300, 000 yuan shall be imposed.
Article 45Where a foreign-funded financial institution undertakes any business in violation of the provisions of Chapter IV of these Regulations, the People's Bank of China shall give it a disciplinary warning, have the illegal income confiscated and impose concurrently a fine of not less than one time but not more than three times the illegal income, or, if there is no illegal income or the illegal income is less than 50, 000 yuan, a fine of not less than 50,000 yuan but not more than 300, 000 yuan shall be imposed.
Article 46Where a foreign-funded financial institution, in violation of the relevant provisions of these Regulations, refuses or hampers the supervision and examination legally carried out or submit false documents, materials or written reports, the People's Bank of China shall give it a disciplinary warning and impose concurrently a fine of not less than 100,000 but not more than 500,000.
Article 47Where a foreign-funded financial institution, in violation of the relevant provisions of these Regulations, fails to submit its financial statements and relevant documents, materials or written reports within the specified period of time, or fails to formulate relevant operating rules and to establish and improve relevant management system, the People's Bank of China shall give it a warning, order it to make corrections within a specified period of time, and impose concurrently a fine of not less than 10,000 yuan but not more than 100,000 yuan.
Article 48Where a foreign-funded financial institution violates these Regulations, in addition to the penalties as provided for in Articles 43 to 47 of this Chapter, if the circumstances are serious, the People's Bank of China may order it to suspend its business for rectification or revoke its license for engaging in financial business, or, have its senior executives disqualified from holding any positions in China for a specified period of time or for life.
Article 49Where a foreign-funded financial institution violates other laws or regulations of the People's Republic of China, the case shall be dealt with by the relevant competent authorities according to law.
Chapter VII Supplementary Provisions
Article 50These Regulations apply mutatis mutandis to institutions engaged in financial business that are established and operated in Chinese mainland by financial institutions from the Hong Kong Special Administrative Region, the Macao Special Administrative Region or Taiwan region.
Article 51Measures for administration of representative offices established in China by foreign financial institutions are to be formulated separately by the People's Bank of China.
Article 52These Regulations shall be effective as of February 1, 2002. The Regulations of the People's Republic of China on Administration of Financial Institutions with Foreign Capital promulgated by the State Council on February 25, 1994 shall be repealed simultaneously.