Regulations of the People's Republic of China on the Administration of Foreign-funded Banks

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 the supervision of foreign-funded banks, and promoting the safe and sound operation of the banking industry.

Article 2 The term "foreign-funded bank" in these regulations means any of the following institutions approved to be established 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 with any other foreign financial institution;

(2)a Chinese-foreign joint venture bank jointly funded by a foreign financial institution with a Chinese company or enterprise;

(3)a branch of a foreign bank

(4)a representative office of a foreign bank.

The institutions listed in subparagraphs (1) to (3) of the preceding paragraph are hereinafter referred to collectively 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 collectively 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 branch 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 (US$126.6 million) 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 (US$12.7 million) 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 per cent 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 (US$23.3 million) 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 RMB-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, and the foreign bank applying for establishing a branch or a representative office, shall have experience in 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, and 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 co-operation 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 US$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 total assets of not less than US$10 billion at the end of the year prior to the submission of the application; and

(4) having a 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 total assets of not less than US$20 billion at the end of the year prior to the submission of the application;

(2) having a 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, 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 to establish 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 to establish a branch and its parent group;

(7) annual reports for the most 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 to establish 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 to establish a branch;

(9) photocopies of the business licence 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.

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