Detailed Rules for the Implementation of the Regulations on the Administration of Foreign-funded Financial Institutions (Chinese and English Text)

The following translation was retrieved from the China Banking Regulatory Commission Web site on July 10, 2006. The Chinese text was retrieved from the Ministry of Commerce's Invest in China Web site on July 10, 2006. Note: These supercede the rules issued in 2002.

---

Order of China Banking Regulatory Commission (No.4, 2004) Adopted by the 16th Chairmen’s meeting of the China Banking Regulatory Commission (CBRC), the Rules for Implementing the Regulation of the People’s Republic of China Governing Foreign-funded Financial Institutions is hereby promulgated by the CBRC to enter into effect as of September 1st, 2004. Rules for Implementing the Regulation of the People’s Republic of China Governing Foreign-funded Financial Institutions ChapterⅠ General Provisions Article 1 The Rules for Implementing the Regulation of the People’s Republic of China Governing Foreign-funded Financial Institutions (hereinafter referred to as the Rules) is formulated in accordance with the Law of the People’s Republic of China on Banking Regulation and Supervision, the Commercial Banking Law of the People’s Republic of China and the Regulation of the People’s Republic of China Governing Foreign-funded Financial Institutions (hereinafter referred to as the Regulation). Article 2 “Foreign capital” in Item 1 and 4 of Article 2 of the Regulation refers to the capital paid in by an institution incorporated outside the territory of the People’s Republic of China. “Foreign bank” in Item 2 refers to a commercial bank incorporated outside the territory of the People’s Republic of China following the approval or authorization by the financial supervisory authority of the country or region of its incorporation. “Foreign financial institution” in Item 3 and 5 refers to a financial institution incorporated outside the territory of the People’s Republic of China or authorization by the financial supervisory authority of the country following the approval or region of its incorporation. Article 3 A foreign-funded legal entity herein refers to a wholly foreign-funded bank, a Sino-foreign joint-equity bank, a wholly foreign-funded finance company or a Sino-foreign joint-equity finance company referred to in the Regulation. Article 4 The China Banking Regulatory Commission (hereinafter referred to as the CBRC) is the organization responsible for the regulation and supervision of foreign-funded financial institutions; and the CBRC local offices shall be responsible for the day-to-day routine supervision of foreign-funded financial institutions within their jurisdictions. ChapterⅡ Establishment and Incorporation Article 5 The prudential requirements referred to in Article 6, 7 and 8 of the Regulation include but are not limited to the following: ⑴ Sound corporate governance structure; ⑵ Persistently sound operational performance; ⑶ Financial reports drawn up in line with prudent accounting principles and clean report by accounting firms on the financial reports for three consecutive years; ⑷ No record of major violation of laws or regulations or of bad credit; ⑸ Favorable reputation in the banking sector and good image in the society; ⑹ Stable political and economic situations in the home country or region of the applicant in the case of establishing a foreign bank branch, as well as a sound communication mechanism between home and host supervisory authorities; ⑺ Other requirements in relevant laws and regulations on investors in the financial sector. Article 6 The sole shareholder or the largest shareholder of a wholly foreign-funded bank established in accordance with Article 6 of the Regulation must be a commercial bank. The sole shareholder or the largest shareholder of a wholly foreign-funded finance company established in accordance with Article 6 of the Regulation must be a commercial bank or a finance company. The capital adequacy ratio of the commercial bank referred to in this Article shall not be lower than eight per cent. Item 2 and 3 of Article 6 of the Regulation apply to the sole shareholder or the largest shareholder. Article 7 The sole foreign shareholder or the largest foreign shareholder of a joint-equity bank established in accordance with Article 8 of the Regulation must be a commercial bank. The sole foreign shareholder or the largest foreign shareholder of a joint-equity finance company established in accordance with Article 8 of the Regulation must be a commercial bank or a finance company. The capital adequacy ratio of the commercial bank referred to in this Article shall not be lower than eight per cent. Item 2 and 3 of Article 8 of the Regulation apply to the sole foreign shareholder or the largest foreign shareholder. Article 8 The representative office in China established by the applicant or foreign party in Article 6, 7 and 8 of the Regulation refers to a representative office established under the supervision of the CBRC. The end of the year prior to the submission of such an application refers to the end of the accounting year prior to the date of application. Article 9 The prudential requirements referred to in Article 20 of the Regulation and Article 16, 17 and 18 of the Rules include but are not limited to the following: ⑴ Sound corporate governance structure; ⑵ Sound risk management system; ⑶ Sound internal control system; ⑷ Effective management information system; ⑸ Good expertise and management capacity of the senior management; ⑹ Persistently sound operational performance and good asset quality; ⑺ No record of major violation of laws or regulations; ⑻ Effective measures for combating money laundering. Article 10 The feasibility study referred to in Article 9, 10 and 11 of the Regulation and Article 18 of the Rules shall include but not be limited to: basic information of the applicant, analysis of market prospect of the proposed institution, as well as business development plan, organizational structure, projection of asset-liability size and profit for the first three years. The name of the proposed foreign bank branch referred to in Item 1 of Article 10 of the Regulation shall include both its Chinese and English names. The Chinese name shall indicate the nationality and form of liabilities of the foreign bank. Article 11 The term photocopy of business license mentioned in the Regulation and the Rules refers to photocopy of business license or other financial business certificates. The photocopy of business license, power of attorney, letter from the parent institution guaranteeing to honor tax and debt obligation of its branches in China, etc. shall be notarized by an institution authorized by the home country or region or authorized by the embassy or consulates of the People’s Republic of China in the country. This requirement does not apply when the business license is issued by the administration authorities of industry and commerce in China. Article 12 Relevant data about the Chinese party mentioned in Item 6 of Article 11 of the Regulation refers to the photocopy of business license and annual reports of the Chinese party for the latest three years. Article 13 The annual reports referred to in the Regulation and herein shall be audited, with an audit opinion attached by accounting firms certified by the home country or region of the applicant. Annual reports printed in a language other than Chinese or English shall be attached with Chinese or English translation. Article 14 Other data required referred to in Article 9, 10 and 11 of the Regulation include but are not limited to the following materials: ⑴ Applicant applying for the establishment of a foreign-funded financial institution for the first time shall provide an introduction of the financial system and financial supervision laws and regulations of the home country or region; ⑵ The Articles of Association of the applicant; ⑶ Organizational chart of the applicant and the group it belongs to, lists of major shareholders, overseas branches and associated companies; ⑷ Policies or rules on combating money laundering activities stipulated by the applicant. Article 15 With the exception of annual reports, all application documents required herein, if written in a foreign language, shall be attached with Chinese translation. Article 16 Where a foreign bank wants to establish additional branches in China, its existing branch(es) in China shall meet the prudential requirements set by the CBRC, as well as the requirements provided for in Item 2, 3, 4 and 5 of Article 7 of the Regulation. Article 17 The following requirements shall be satisfied when a solely foreign-funded bank or a joint-equity bank applies for establishing a branch: ⑴ The applicant has operated in China for more than three years and remained profitable for two consecutive accounting years prior to the application; ⑵ The capital adequacy ratio of the applicant remains no less than eight per cent; ⑶ For the establishment of each additional branch, the applicant shall allocate a non-callable minimum amount of freely convertible currency equivalent to RMB100 million to the proposed branch as the operating capital of the branch. The aggregate amount of operating capital allocated by the applicant to all its branches, including the proposed one, shall not exceed 60 per cent of its registered capital; ⑷ Other prudential conditions required by the CBRC. Article 18 For the establishment of a branch by a wholly foreign-funded bank or a joint-equity bank in China, the applicant shall provide the following documents (each in three copies) to the CBRC local office where the proposed branch will be located (hereinafter referred to as relevant CBRC local office). After the preliminary review by the relevant CBRC local office, the documents will be sent directly to the CBRC headquarters for final approval with a copy sent to the CBRC local office at a higher level: ⑴ Letter of application signed by the chairman or president (CEO, general manager) of the applicant, which shall include the name of the proposed branch, amount of operating capital to be allocated, intended business activities, etc.; ⑵ Resolution passed by the board of directors on approval of the establishment of the branch; ⑶ A feasibility study; ⑷ A photocopy of the business license; ⑸ The annual reports for the past three years; ⑹ The Articles of Association of the applicant; ⑺ Other documents required by the CBRC. Article 19 The letter of application for the establishment of a foreign-funded legal entity shall be addressed to the CBRC Chairman and signed by the chairman or president (CEO, general manager) of each investor; the letter of application for the establishment of a foreign bank branch shall be addressed to the CBRC Chairman and signed by the chairman or president (CEO, general manager) of the applicant. Article 20 For the establishment of a foreign-funded financial institution, the applicant shall submit the application documents (each in duplicate) required in Article 9, 10 and 11 of the Regulation to the CBRC and submit a copy to the CBRC local office where the proposed branch will be located. Article 21 The CBRC shall make a decision within six months from the date of receiving all application documents required for establishing a foreign-funded financial institution on whether to approve or reject the preparation of the proposed institution and inform the applicant of the decision in writing. After receiving the preparation notice, the applicant shall pick up a formal application form in the relevant CBRC local office within fifteen days after receiving the notice and start the preparatory work. During the preparatory period, the applicant shall set up a preparatory team engaged in daily preparatory work and report the names the team leaders to the relevant CBRC local office. When the preparatory work is finished, the team shall be dissolved automatically. The preparatory period is six months. If the applicant fails to pick up the formal application form within the required time limit, it is prohibited to apply again for establishing an operational office in the same city within one year from the date of receiving the preparation notice. If the applicant receives a rejection notice, it can apply again when satisfying the requirements of establishing a foreign-funded financial institution. Article 22 The principal persons in Article 14 of the Regulation refer to the chairman or president (CEO, general manager) of a foreign-funded legal entity or the president (or general manager) of a foreign bank branch. Article 23 The applicant shall complete the following work within the preparatory period: ⑴ Establishing an internal control system, including internal organizational structure, authorization and credit extension, management of credit funds as well as management policy and operational procedures for capital transaction, book keeping and computer system. The management policy and operational procedures shall be filed with the relevant CBRC local office. ⑵ Establishing a professional team with appropriate number of staff that has be trained on rules and regulations and professional knowledge and can cope with business development and meet the requirements of effective monitoring of major business risks, examination, approval and reexamination of business at different levels, division of labor and checks and balances of key posts, etc.; ⑶ Printing main business vouchers and receipts used for external transactions, samples of which shall be filed with the relevant CBRC local office; ⑷ Installing security facilities that are approved by relevant authorities; relevant certificates shall be filed with the relevant CBRC local office; ⑸ Completing the pre-opening audit on its internal control system, accounting system, computer system, etc. by an accounting firm recognized by the relevant CBRC local office; the audit report shall be filed with the relevant CBRC local office. Article 24 The applicant shall submit an application to the relevant CBRC local office at least one month before the expiration of the preparatory period if it requests for an extension of the preparatory period. The letter of application shall be signed by the persons in charge of the preparatory team. The application will be rejected by the relevant CBRC local office if it is submitted the application beyond the required time limit. The relevant CBRC local office shall make a decision of approval or rejection within fifteen days from the date of receiving the application for extending the preparatory period. In the case of rejection, the relevant CBRC local office shall give a written notice to the applicant explaining the reasons of rejection and send a copy to the CBRC headquarters. Article 25 Upon completion of the preparatory work, the applicant shall submit the letter of application signed by the persons in charge of the preparatory team, the filled application form as well as documents required in Article 14 of the Regulation to the relevant CBRC local office. The application is subject to examination and approval first by the relevant CBRC local office, which shall then send the application directly to the CBRC headquarters for final approval with a copy sent to the CBRC local office at a higher level. Article 26 The CBRC shall make a decision of approval or rejection of the application within two months from the date of receiving the completed formal application form and relevant documents required for establishing a foreign-funded financial institution. The applicant shall pick up the document of approval at the CBRC within fifteen days from the date of receiving a notice from the CBRC. If the application is rejected, the applicant can apply again when meeting all the requirements of establishing a foreign-funded financial institution. Article 27 In the case that the application for establishing a foreign-funded financial institution is approved, the applicant shall apply to the relevant CBRC local office for a prior opening inspection after picking up the document of approval from the CBRC headquarters. The application shall be signed by the chairman or president (CEO or general manager) of the approved foreign-funded legal entity or the president or general manager of the approved foreign bank branch. After the applicant passes the inspection by the relevant CBRC local office, it shall pick up the financial business certificate at the CBRC headquarters by presenting the certificate of inspection. If a foreign-funded financial institution fails to pass the inspection, it may apply to the inspection CBRC office for a re-inspection within ten days from receiving the notice of the inspection failure. Article 28 A foreign-funded financial institution shall make a public announcement of its opening for business in the national newspaper designated by the CBRC headquarters and local newspaper designated by the relevant CBRC local office, and shall give a written notice on the date of opening for business to the relevant CBRC local office before opening for business. Article 29 A foreign-funded financial institution shall open for business within three months from the date of approval of its establishment by the CBRC headquarters, except in the case when an extension is granted by the relevant CBRC local office under special circumstances. When a foreign-funded financial institution applies for an extension of its opening for business, it shall submit extension application to the relevant CBRC local office within two months from the date of approval of its establishment. The application shall be signed by the chairman or president (CEO or general manager) of the foreign-funded legal entity or the president or general manager of the foreign bank branch. The relevant CBRC local office shall make a decision of approval or disapproval within fifteen days from the date of receiving the extension application. If the application is rejected, the relevant CBRC local office shall give a written notice to the applicant explaining the reasons of non-approval and send a copy to the CBRC headquarters. The relevant CBRC local office shall not approve the extension application, if the applicant fails to submit the application within the required time limit. Opening for business may be extended for no more than three months. If a foreign-funded financial institution still fails to open for business within the time limit, the approval of establishment will automatically become invalid and the foreign-funded financial institution shall return the original and copy of financial business certificate to the CBRC headquarters. The applicant shall be prohibited to apply again for establishing an operational office in the same city within one year from the date of expiration of the last establishment approval. Article 30 Restructuring of a foreign bank branch into a foreign-funded legal entity shall be conducted in compliance with legal and prudential principles as well as continuing operation and vice versa. For restructuring into a foreign-funded legal entity, the foreign bank branch shall apply to the relevant CBRC local office in accordance with the requirements of establishing a foreign-funded legal entity. For restructuring into a foreign bank branch, the foreign-funded legal entity shall apply to the relevant CBRC local office in accordance with the requirements of establishing a foreign bank branch. The relevant CBRC local office will send the application directly to the CBRC headquarters for approval with a copy sent to the CBRC local office at a higher level. The application documents shall include the proposed program for the resolution of claims and liabilities during the restructuring process. Chapter III Scope of Business Article 31 A foreign-funded financial institution shall meet the following applicable qualification before applying for conducting foreign exchange business with overseas institutions, foreign-invested enterprises, permanent missions of foreign countries in China, representative missions of Hong Kong, Macau and Taiwan in mainland China, foreigners and residents of Hong Kong, Macau and Taiwan; and conducting prescribed foreign exchange business with non-foreign-invested enterprises. The foreign exchange businesses refer to those described in Article 17 or Article 18 of the Regulation. (1) The operating capital of a foreign bank branch shall be no less than the equivalent of RMB100 million in freely convertible currencies; (2) The registered capital of a wholly foreign-funded bank or a joint-equity bank shall be no less than the equivalent of RMB300 million in freely convertible currencies; (3) The operating capital of each branch of a wholly foreign-funded bank or a joint-equity bank shall be no less than the equivalent of RMB100 million in freely convertible currencies; (4) The registered capital of a wholly foreign-funded finance company or a joint-equity finance company shall be no less than the equivalent of RMB200 million in freely convertible currencies. Article 32 A foreign-funded financial institution shall meet the following applicable qualification before applying for conducting with all kinds of customers foreign exchange business described as in Article 17 or Article 18 of the Regulation. (1) The operating capital of a foreign bank branch shall be no less than the equivalent of RMB200 million in freely convertible currencies; (2) The registered capital of a wholly foreign-funded bank or a joint-equity bank shall be no less than the equivalent of RMB400 million in freely convertible currencies; (3) The operating capital of each branch of a wholly foreign-funded bank or a joint-equity bank shall be no less than the equivalent of RMB100 million in freely convertible currencies; (4) The registered capital of a wholly foreign-funded finance company or a joint-equity finance company shall be no less than the equivalent of RMB300 million in freely convertible currencies. Article 33 A foreign-funded financial institution shall meet the following applicable qualification before applying for, in accordance with Article 20 of the Regulation, foreign exchange business with overseas institutions; conducting foreign exchange and renminbi business with foreign-invested enterprises, permanent missions of foreign countries in China, representative missions of Hong Kong, Macau and Taiwan in mainland China, as well as foreigners and residents of Hong Kong, Macau and Taiwan; and conducting prescribed foreign exchange and renminbi businesses with non-foreign-invested enterprises. The foreign exchange and renminbi businesses refer to those described in Article 17 or Article 18 of the Regulation. (1) The operating capital of a foreign bank branch shall be no less than the equivalent of RMB200 million, among which the capital in renminbi shall be no less than RMB100 million and that in a foreign currency shall be no less than the equivalent of RMB100 million in freely convertible currencies. (2) The registered capital of a wholly foreign-funded bank or a joint-equity bank shall be no less than RMB400 million, among which the capital in renminbi shall be no less than RMB100 million and that in a foreign currency shall be no less than the equivalent of RMB300 million in freely convertible currencies; (3) The operating capital of each branch of a wholly foreign-funded bank or a joint-equity bank shall be no less than RMB200 million, among which the capital in renminbi shall be no less than RMB100 million and that in a foreign currency shall be no less than the equivalent of RMB100 million in freely convertible currencies; (4) The registered capital of a wholly foreign-funded finance company or a joint-equity finance company shall be no less than RMB300 million, among which the capital in renminbi shall be no less than RMB100 million and that in a foreign currency shall be no less than the equivalent of RMB200 million in freely convertible currencies. Article 34 A foreign-funded financial institution shall meet the following applicable qualification before applying for, in accordance with Article 20 of the Regulation, conducting foreign exchange business with all kinds of customers; conducting renminbi business with foreign-invested enterprises, permanent missions of foreign countries in China, representative missions of Hong Kong, Macau and Taiwan in mainland China, as well as foreigners and residents from Hong Kong, Macau and Taiwan; and conducting prescribed renminbi business with non-foreign-invested enterprises. The foreign exchange and renminbi businesses refer to those described in Article 17 or Article 18 of the Regulation. (1) The operating capital of a foreign bank branch shall be no less than RMB300 million, among which the capital in renminbi shall be no less than RMB100 million and that in a foreign currency shall be no less than the equivalent of RMB200 million in freely convertible currencies; (2) The registered capital of a wholly foreign-funded bank or a joint-equity bank shall be no less than RMB500 million, among which the capital in renminbi shall be no less than RMB100 million and that in a foreign currency shall be no less than the equivalent of RMB400 million in freely convertible currencies; (3) The operating capital of each branch of a wholly foreign-funded bank or a joint-equity bank shall be no less than RMB200 million, among which the capital in renminbi shall be no less than RMB100 million and that in a foreign currency shall be no less than the equivalent of RMB100 million in freely convertible currencies; (4) The registered capital of a wholly foreign-funded finance company or a joint-equity finance company shall be no less than RMB400 million, among which the capital in renminbi shall be no less than RMB100 million and that in a foreign currency shall be no less than the equivalent of RMB300 million in freely convertible currencies. Article 35 A foreign-funded financial institution shall meet the following applicable qualification before applying for, in accordance with Article 20 of the Regulation, conducting foreign exchange business with all kinds of customers; and conducting renminbi business with foreign-invested enterprises, permanent missions of foreign countries in China, representative missions of Hong Kong, Macau and Taiwan in mainland China, as well as foreigners and residents of Hong Kong, Macau and Taiwan, and non-foreign-invested enterprises. The foreign exchange and renminbi businesses refer to those described in Article 17 or Article 18 of the Regulation. (1) The operating capital of a foreign bank branch shall be no less than RMB300 million, among which the capital in renminbi shall be no less than RMB100 million and that in a foreign currency shall be no less than the equivalent of RMB200 million in freely convertible currencies; (2) The registered capital of a wholly foreign-funded bank or a joint-equity bank shall be no less than RMB600 million, among which the capital in renminbi shall be no less than RMB200 million and that in a foreign currency shall be no less than the equivalent of RMB400 million in freely convertible currencies; (3) The operating capital of each branch of a wholly foreign-funded bank or a joint-equity bank shall be no less than RMB200 million, among which the capital in renminbi shall be no less than RMB100 million and that in a foreign currency shall be no less than the equivalent of RMB100 million in freely convertible currencies; (4) The registered capital of a wholly foreign-funded finance company or a joint-equity finance company shall be no less than RMB500 million, among which the capital in renminbi shall be no less than RMB200 million and that in a foreign currency shall be no less than the equivalent of RMB300 million in freely convertible currencies. Article 36 A foreign-funded financial institution shall meet the following applicable qualification before applying for, in accordance with Article 20 of the Regulation, conducting foreign exchange and renminbi businesses with all kinds of customers described in Article 17 or Article 18 of the Regulation: (1) The operating capital of a foreign bank branch shall be no less than RMB500 million, among which the capital in renminbi shall be no less than RMB300 million and that in a foreign currency shall be no less than the equivalent of RMB200 million in freely convertible currencies; (2) The registered capital of a wholly foreign-funded bank or a joint-equity banks shall be no less than RMB1 billion, among which the capital in renminbi shall be no less than RMB600 million and that in a foreign currency shall be no less than the equivalent of RMB400 million in freely convertible currencies; (3) The operating capital of each branch of a wholly foreign-funded bank or a joint-equity bank shall be no less than RMB300 million, among which the capital in renminbi shall be no less than RMB200 million and that in a foreign currency shall be no less than the equivalent of RMB100 million in freely convertible currencies; (4) The registered capital of a wholly foreign-funded finance company or a joint-equity finance company shall be no less than RMB700 million, among which the capital in renminbi shall be no less than RMB400 million and that in a foreign currency shall be no less than the equivalent of RMB300 million in freely convertible currencies. Article 37 The trade in government bonds, financial bonds and securities in foreign currencies other than stocks, described in Item 4 of Article 17 and Item 4 of Article 18 of the Regulation, includes but is not limited to the following foreign exchange investment: bonds issued by the Chinese and foreign governments, Chinese financial institutions and Chinese non-financial institutions in overseas markets. Article 38 The credit investigation and consultancy service described in Item 12 of Article 17 and Item 8 of Article 18 of the Regulation refer to those related to bank businesses. Article 39 Prescribed foreign exchange business for non-foreign-invested enterprises described in Article 31 and Article 33 of the Rules refers to the businesses of transferring foreign exchange loans into deposits, and engagement in export settlement, import settlement related to the loans and inward remittances. Prescribed RMB business for non-foreign-invested enterprises described in Article 33 and Article 34 of the Rules refers to the businesses of providing matching renminbi loans as part of foreign exchange loan agreements, as well as transferring loans into deposits, and providing guarantee for the non-foreign-invested enterprises that have already received foreign exchange loans extended by the same foreign-funded financial institution. Article 40 The Article 20 of the Regulation sets the qualifications of a foreign-funded financial institution for its initial application for the renminbi business. The Item 1 and 2 of Article 20 of the Regulation require that the applicant, which applies for renminbi business, has operated for at least three years and has remained profitable for two consecutive years prior to the application. A foreign-funded financial institution authorized to conduct renminbi business shall meet the following qualifications before applying for expansion of renminbi business customer base: (1) Remains profitable for two consecutive years prior to the application; (2) Satisfies other prudential requirements prescribed by the CBRC. “Operated for at least three years” refers to the period from the date of establishment approval of the institution to the day of application. “Remains profitable for two consecutive years prior to the application” refers to the two consecutive accounting years, prior to the day of application, for which the financial statements are audited and show profitability. Article 41 A foreign-fund financial institution shall provide the following documents (each in three copies) to the CBRC local office when filing an initial application for renminbi business or expansion of renminbi business customer base. The CBRC local office shall make preliminary review of the application documents, then hand them over with review opinions to the CBRC headquarters for final approval while sending a copy to the CBRC local office at a higher level. (1) Letter of application addressed to the chairman of the CBRC and signed by the chairman or president (CEO, general manager) of the applicant, which shall include the detailed contents of renminbi business or expansion of renminbi customer base, the prospective increase of capital or increase of operating capital, etc.; (2) A feasibility study report; (3) Prospective revision of the Articles of Association (applicable only to a foreign-funded legal entity); (4) Operational procedures and internal control system of the prospective business; (5) Audited balance sheets and income statements of the two consecutive accounting years prior to the day of application; (6) Other documents required by the CBRC. Article 42 A foreign-funded financial institution shall complete the following preparatory work within four months from the date of CBRC approval for its renminbi business or expansion of the customer base: (1) Transferring the increased capital or operating capital to its account in China, and submitting to the CBRC local office a capital verification certificate issued by an accounting firm which is accepted by the CBRC office; (2) Building up a professional team with an appropriate number of staff capable of coping with business development; (3) Printing important business vouchers and documents to be used for external transactions, and handing in the samples to the CBRC local office; (4) Installing security facilities that are approved by relevant authorities, and handing in the certificates to the CBRC local office; (5) Formulating the internal controls and operational procedures of renminbi business, and submitting to the CBRC local office. If the foreign-funded financial institution fails to finish the preparatory work within four months, the approval issued by the CBRC will automatically become invalid. Article 43 A foreign financial institution shall submit an inspection application to the CBRC local office upon completion of its preparatory work. The application shall be signed by the chairman or president (CEO, general manager) of the foreign-funded legal entity or by the president or general manager of the foreign bank branch. The foreign-funded financial institution shall, upon passing the inspection, obtain an approval document from the CBRC headquarters by presenting the inspection certificate and capital verification certificate. In case that the foreign-funded financial institution fails to pass the inspection, it may apply for re-inspection to the inspection CBRC office ten days after receiving the notice of the inspection result. Article 44 A foreign-funded financial institution shall, before starting the newly approved renminbi business, make a public announcement in nationwide newspaper designated by the CBRC headquarters and local newspaper designated by the CBRC local office. Article 45 The geographical scope for renminbi business by foreign-funded financial institutions is limited to the cities where foreign-funded financial institutions are allowed to engage in renminbi business. Article 46 The new business products described in Article 21 of the Regulation refer to the financial products that have not yet been provided by banks or finance companies in China or those that have already been provided by banks or finance companies in China but are considered high risk. A foreign-funded financial institution shall, when applying for new business products, submit the following documents (each in three copies) to the CBRC local office. The CBRC local office shall make a preliminary review of the application documents, then hand them over with review opinions to the CBRC headquarters for final approval while sending a copy to the CBRC local office at a higher level. (1) Letter of application signed by the representative authorized by the head office of the foreign-funded financial institution; (2) Detailed information of the intended business activities and necessary preparations for such business activities, including operational procedures, risk-benefits analysis, control measures, professional staff and computer systems, etc.; (3) Other documents required by the CBRC. The CBRC shall make a decision of approval or rejection on the application within sixty days from the date of receiving the complete application documents from the foreign-funded financial institution. Article 47 If a foreign-funded financial institution intends to introduce new business products in more than two branches (inclusive) in China, the application documents may be submitted in a unified way by the head office of the foreign-funded legal entity or the reporting branch of the foreign bank to the CBRC local office. The CBRC local office shall make a preliminary review of the application documents, then hand them over with review opinions to the CBRC headquarters for final approval while sending a copy to the CBRC local office at a higher level. The foreign-funded financial institution and its network, having obtained the approval, shall submit written reports to the CBRC local offices within five days from the date of initiating the new business. Article 48 A foreign-funded financial institution shall follow the application procedures in Article 46 of Article 47 of the Rules when applying for “other businesses” described in Item 13 of Article 17 and Item 10 of Article 18 of the Regulation. Article 49 A foreign-funded financial institution and its network shall submit written reports to the CBRC local offices within five days from the date of initiating the business products or services within the approved business scope and products. Article 50 A foreign-funded financial institution may engage in the business of sale and purchase of foreign exchange in accordance with applicable regulations. Article 51 A wholly foreign-funded bank, a joint-equity bank and a foreign bank branch that is authorized to conduct the renminbi business, may engage in renminbi inter-bank borrowing business in accordance with applicable regulations. Chapter Ⅳ Qualification Requirement for Senior Managers Article 52 Senior management in a foreign-funded financial institution shall have the following qualifications: (1) Familiar with and observant of the Chinese financial supervisory laws and regulations; (2) Equipped with professional knowledge, working experience and organizational capabilities compatible with the held positions; (3) No record of misconduct. Article 53 A person under any of the following circumstances shall not be allowed to assume the post of senior management in a foreign-funded financial institution: (1) Having criminal record; (2) Having been severely penalized for violation of laws and regulations; (3) Bearing major or direct management responsibility for bankruptcy, or serious violation of regulations, or revocation of financial business certificate or business license of the financial institution, the enterprise or corporation which she or he has worked for and the penalty has been imposed on for less than five years; (4) Having caused serious damages or losses, due to fateful mistakes, to the financial institution, the enterprise or corporation that she or he has worked for in the last five years. Article 54 The CBRC adopts an approval procedure and a prior filing procedure for the administration of senior management of a foreign-funded financial institution. Article 55 The approval procedure applies to the senior management of the following posts in a foreign-funded financial institution, for which the candidate shall have the following applicable qualifications: (1) Serving as chairman or president (general manager) of a foreign-funded legal entity, the candidate shall have over ten years of experience in the financial sector or over fifteen years of experience in related economic sector (including over five years of experience in the financial sector) with manager position of business department or above for over three years; (2) Serving as vice chairman, vice president (deputy general manager) of a foreign-funded legal entity or president (general manager) of a foreign bank branch, the candidate shall have over five years of experience in the financial sector or over ten years of experience in related economic sector (including over three years of experience in the financial sector) with manager position of business department or above for over two years; (3) Serving as vice president (deputy general manager) of a foreign bank branch or president of a sub-branch, the candidate shall have over four years of experience in the financial sector or over six years of experience in related economic sectors (including over two years of experience in the financial sector); (4) The candidate shall have at least a bachelor degree; an extra over six years of experience in the financial sector or over eight years of experience in related economic sectors (including over four years of experience in the financial sector) is required if the academic degree requirement is not met. Article 56 The CBRC is responsible for approving or revoking the qualification of the following personnel: (1) Chairman, president (general manager) of a foreign-funded legal entity; (2) President (general manager) of a foreign bank branch; The CBRC local offices are responsible for approving or revoking the qualification of the following personnel: (1) Vice chairman or vice president (deputy general manager) of a foreign-funded legal entity; (2) Vice president (deputy general manger) of a foreign bank branch or president of a foreign bank sub-branch. Article 57 For the senior management approval, the following documents (each in three copies) shall be submitted to the CBRC local office: (1) Letter of application to the CBRC signed by the authorized representative of the applicant. Application subject to the approval of the CBRC shall be addressed to the chairman of the CBRC; and that subject to the approval of the CBRC local office shall be addressed to the head of the CBRC local office; (2) A Power of Attorney for the proposed senior management person signed by the authorized representative of the applicant; and Power of Attorney for the authorized representative; (3) Curriculum Vitae of the candidate; (4) Photocopies of the identification card and academic diploma of the candidate; (5) A resolution of the Board of Directors or the shareholders’ meeting shall be submitted if such a meeting is required according to the Articles of Association of the foreign-funded legal entity; (6) Statement of non misconduct record signed by the candidate; (7) Other documents required by the CBRC. Article 58 The CBRC headquarters may, when receiving the application documents from a foreign-funded financial institution, have an interview with the candidate president (general manager) before his or her tenure; and the CBRC local office may have such an interview with other relevant candidates before their tenure. Article 59 The minimum tenure of the senior management of a foreign-funded financial institution, to whom the approval procedure is applicable, shall be two years. The president (general manager) and vice president (deputy general manager) shall be prohibited to take executive posts in other business institutions during the tenure. Senior management of a foreign-funded financial institution cannot simultaneously take any post in the representative offices in China. Article 60 The “a senior executive” described in Item 7 of Article 33 in the Regulation refers to a member of senior management to whom the approval procedure is applicable. Article 61 The filing system applies to senior management of the following posts in a foreign-funded financial institution: (1) Director of the board, assistant to the president (general manager), chief financial officer, chief auditing officer, senior compliance manager and chief operation officer of a foreign-funded legal entity; (2) Chief Financial Officer, Compliance Manager and Chief Operation Officer of a foreign bank branch; (3) Vice president of a foreign bank sub-branch; (4) Other senior management posts that the CBRC deems necessary to be filed for record. Article 62 For the senior management prior filing the following documents (each in three copies) shall be submitted to the CBRC local office: (1) Letter of application signed by the authorized representative of the foreign-funded financial institution; and the Power of Attorney for the authorized representative; (2) Curriculum Vitae of the candidate; (3) Photocopies of the identification card and academic diploma of the candidate; (4) Statement of non-misconduct record signed by the candidate; (5) Other documents required by the CBRC. Article 63 The photocopies of the curriculum vitae, identification card and academic diploma of the candidates shall be signed by the authorized representative of the applicant. Article 64 In case that the president (general manager) of a foreign-funded financial institution or its branch is absent from office for over a month, he or she shall report to the CBRC local office in written; and the president (general manager) shall be replaced in case of his absence from office for over three consecutive months with no justified explanations. Article 65 The CBRC may revoke the qualification of a member of senior management for a period up to lifelong according to the severity and aftermath if he or she is responsible for any of the following circumstances: (1) He or she has been prosecuted for criminal activities; (2) He or she refuses, interferes, hampers or seriously influences legitimate supervision by the CBRC; (3) Serious property damages and losses or serious financial criminal cases have been incurred as a result of inefficient or weak internal controls; (4) The institution which he or she works for is taken over, acquired and merged or declared bankrupt because of serious violation of laws and regulations, inefficient internal controls or persistently poor management; (5) The institution which he or she works for suffers heavy losses because of persistently poor management; (6) The CBRC has discovered illegal or rule-breaking activities or other circumstances or conducted by the person prior to his or her appointment, that make him/her inappropriate to take the post; (7) Other circumstances identified by the CBRC. Article 66 For senior management subject to approval by the CBRC, the CBRC headquarters shall make a reply within thirty days from the date of receiving complete application documents. For senior management subject to approval by the CBRC local office, the CBRC local office shall make a reply within thirty days from the date of receiving complete application documents. A written notice explaining the reasons for non-approval shall be issued to the applicant if the application is rejected. For senior management subject to prior filing with the CBRC local office, the application shall be taken as approved if the CBRC local office does not make a written objection within thirty days from the date of receiving complete documents. Chapter V Supervision and Regulation Article 67 If a foreign bank has established more than two branches (inclusive) in China, its head office or its regional head office shall designate a reporting branch to consolidate the financial statements and other relevant information of all its branches in China; it shall also designate a compliance manager for the China region and report to the CBRC headquarters and the relevant CBRC local offices in writing of the designation. The CBRC and its local offices shall supervise these institutions on a consolidated basis. Article 68 The interest-bearing assets referred in Article 24 of the Regulations includes the interest-bearing assets in foreign exchange and renminbi. Thirty percent of the foreign exchange operating capital of a foreign bank branch shall be maintained in the form of foreign currency time deposits with a maturity of no less than six months as foreign exchange interest-bearing asset; thirty percent of the renminbi operating capital shall be maintained in the form of renminbi government bonds or renminbi time deposits with a maturity of no less than six months as renminbi interest-bearing asset. The above-mentioned time deposits in foreign or local currencies with a maturity of no less than six months shall be put into no more than three (inclusive) Chinese commercial banks in China with sound operation and strong financial strength. The interest rate of the time deposits of interest-bearing assets shall be decided by both sides according to relevant regulations. The foreign bank branch shall report to the relevant CBRC local offices the banks where the interest-bearing assets is deposited, as well as the volume, interest rate and maturity. The foreign banks shall not be allowed to use the interest-bearing assets held in the form of time deposits without the approval of the relevant CBRC local offices. The banks where the interest-bearing assets is deposited shall handle the change of interest-bearing assets according to the documents approved by the relevant CBRC local offices. The foreign banks shall not be allowed to hypothecate and repurchase the interest-bearing assets in the form of renminbi government bonds, or adopt any other solutions that may influence the dominance of the interest-bearing asset. This Article is not applicable to the branches set up by wholly foreign-funded banks and joint-venture banks in China. Article 69 The capital mentioned in Article 26 and 28 of the Regulations refers to the aggregate of paid-in capital, capital surplus, profit surplus, retained earnings, general loan loss provisions, revaluation reserves and the amount of subordinated bonds with a maturity of five years or longer subtracting capital investment in non-consolidated financial institutions. The sum of operating capital and reserves mentioned in Article 28 of the Regulations refers to the sum of the operating capital, retained earnings and the general loan loss provisions. The risk assets mentioned in Article 28 of the Regulations refer to the risk-weighted assets on and off balance sheet calculated according to the relevant regulations on risk-weighted assets. The methods of calculation and review of the capital adequacy ratio mentioned in Article 25 of the Regulations shall be in line with the Regulation Governing Capital Adequacy Ratio of Commercial Banks of the CBRC. The ratio provided in Article 28 of the Regulations shall be calculated for each individual branch of the foreign-funded financial institutions within China, and reviewed quarterly based on the average balance at the end of each month. The CBRC may make special requirement on capital adequacy ratio based on the risk profile of a foreign-funded legal entity. Article 70 Associated enterprises mentioned in Article 26 of the Regulations refer to the circumstance that one enterprise has the capacity to directly or indirectly control the other enterprise, that one enterprise is controlled by the other enterprise, or that two or multiple enterprises are under the control of one party (such as: parent company, subsidiary company and subsidiary companies under the same parent company); joint venture; affiliated company; companies directly controlled by other company’s major investors, senior managerial personnel, or their close relations (Including: directly related family members within three generations and indirectly selected collateral relatives within two generations.); other companies to which the assets and profit can be transferred to. Credit authorization mentioned in Article 26 of the Regulations and in Article 95 of the Rules includes lendings, borrowings, foreign trade finance, acceptance and discount of bills, overdraft, factoring, guarantee, loan commitment and issuing letter of credit. Article 71 The ratio provided in Article 26 and 27 of the Regulations shall be examined quarterly based on the balance at the end of each month. Article 72 The current assets mentioned in Article 29 of the Regulations refer to cash, gold, deposits with the People’s Bank of China, inter-bank deposits, inter-bank placing with a maturity of no more than one month, inter-bank lending with a maturity of no more than one month, net asset balance of the creditor resulted from inter-bank transaction with the overseas correspondents and affiliated branches, discount and other purchased notes mature within one month, other account receivables mature within one month, loans with a maturity of no more than one month, bonds mature within one month and other assets that can be cashed in within one month. The foreseeable irrevocable part shall be deducted from the above-mentioned assets. The current assets mentioned above does not include the interest-bearing assets. The current liabilities mentioned in Article 29 of the Regulations refer to the deposits, inter-bank borrowings, inter-bank borrowings over four months, account payables and other liabilities that shall become due within one month as well as the net debt balance of the debtor resulted from overseas intra-bank transactions and affiliated institutions The foreign-funded financial institutions shall calculate the liquidity ratio each day in renminbi and foreign exchange respectively and maintain the required liquidity ratios provided in Article 29 of the Regulations. The liquidity ratio of a foreign-funded legal entity shall be examined by the CBRC on a consolidated basis while the liquidity ratio of the branches of foreign banks shall be examined individually. Article 73 The foreign exchange deposits taken within the territory of the People’s Republic of China mentioned in Article 30 of the Regulations include inter-bank non-inter-bank foreign exchange deposits. “Total foreign exchange assets held within the Chinese territory” is calculated in the following way: Total Foreign Exchange Assets within the territory of China = Total Foreign Exchange Assets ? Overseas Intra-bank Foreign Exchange (Asset) Transactions ? (Asset) Transactions with Overseas Affiliated Institutions ?Overseas Foreign Exchange Loans ? Foreign Exchange Deposits in Overseas Banks ? Foreign Exchange Lending to Overseas banks ?Overseas Foreign Exchange Investment Overseas foreign exchange investment does not include the following foreign exchange investment: securities of the Chinese government, Chinese financial institutions and non-financial institutions issued overseas. The ratio provided in Article 30 of the Regulations shall be examined based on the balance at the end of each month for each institution. Article 74 The foreign-funded financial institutions shall report their assets, liabilities and owner’s equity in a truthful manner. Article 75 The intra-bank transfer of credit assets, including those from the head office of a foreign-funded financial institution is subject to approval by the relevant CBRC local office. Article 76 The foreign-funded financial institutions shall establish a risk asset classification system that meets the minimum criteria stipulated in the Guidelines on the Loan Classification by Risks and report the relevant CBRC local offices the mapping between their criteria and the criteria stipulated in the Guidelines on the Loan Classification by Risks to the relevant CBRC local office. In case that any changes occur in the mapping, the foreign-funded financial institutions shall report such changes in writing to the relevant CBRC local offices. Article 77 The foreign-funded financial institutions shall set aside loan loss provisions according to the regulations governing banks’ loss provisioning. Article 78 The foreign-funded financial institutions shall adopt prudential accounting practices and implement the rules governing accounting practices of financial institutions. Article 79 The terms of credit provided by a foreign-funded financial institution to related parties shall be no more preferential than the terms of similar credits to other borrowing parties. The related parties in this Article refer to: (1) Directors, supervisors, managers, credit officers of the foreign-funded financial institution and their close relatives; (2) Corporations, enterprises or other economic organizations in which the parties in Item (1) have investment or assume senior managerial post; (3) Shareholders of a foreign-funded corporate entity and their associated enterprises. Article 80 “The Chinese Certified Public Accountant” mentioned in Article 32 of the Regulations refers to the Chinese certified public accountant who has previously conducted qualified annual auditing and has the experience of auditing financial institutions. One month before hiring Chinese certified public accountants to conduct annual auditing, the foreign-funded financial institutions shall report in writing to the relevant CBRC local offices the basic information of the accounting firm and the chief accountants to conduct the auditing. Article 81 At the end of each accounting year, a foreign-funded financial institution shall hire an accounting firm recognized by the CBRC to conduct annual auditing and submit the auditing report with management improvement suggestions to the relevant CBRC local office within four months after the end of the accounting year. For a foreign-funded legal entity or a foreign bank with more than two (inclusive) branches in China, the auditing shall be carried out by an accounting firm recognized by the CBRC over all the operational offices on a consolidated basis and the auditing report with management improvement suggestions shall be submitted to the relevant CBRC local office where the head office of the foreign-funded legal entity or the reporting branch of the foreign bank is located. The annual auditing conducted on the foreign-funded financial institutions shall at least cover the following aspects: financial statements, risk management, operational controls, compliance and assets quality. The annual auditing conducted on the foreign-funded legal entity shall at least cover the following aspects: capital adequacy ratio, assets quality, internal management, profitability, liquidity and market risk management. Article 82 The following documents shall be submitted to the relevant CBRC local office if a foreign-funded legal entity adjusts or transfers the registered capital or changes shareholders who hold more than 10 percent of the total amount of capital or total shares, or a foreign bank applies to change the total amount of operating capital of its branches in China. After preliminary review by the relevant CBRC local office, the application shall be directly reported to the CBRC headquarters for final approval and in the mean time, be copied to the CBRC office at higher level: (1) Letter of application signed by the Chairman or President (CEO or General Manager) of the applicant; (2) Resolution on adjustment or transfer of registered capital or change of shareholders passed by the board of directors of the foreign legal entity; (3) If the foreign partner of a foreign-funded legal entity changes the amount or percentage of its equity investment, it shall provide the resolution passed by the board of directors or the letter of opinion signed by its legal representative on such proposed changes. If the foreign partner is a financial institution, it shall provide the letter of opinion from the financial supervisory authority of its home country or region; (4) The assignment agreement or contract signed by relevant shareholders of the foreign-funded corporate entity. (5) Other documents required by the CBRC. Article 83 If approval is granted to the application for changing registered capital or operating capital or the shareholders who hold more than ten percent of the total capital or shares by a foreign-funded financial institution, the institution shall hire a certified public accounting firm recognized by the relevant CBRC local office to verify capital within thirty days from the date of receiving the approval by the CBRC and submit the capital verification certificate to the relevant CBRC local office. Article 84 The new shareholders of a foreign-funded legal entity shall meet the criteria stipulated in the Regulation and the Rules. Article 85 If a foreign bank wants to change the name of its branches in China because of merger, split or other reasons, it can go through the formal renaming procedure in two steps or directly: The head office of the foreign bank can make an initial application to the CBRC headquarters and submit the following documents: (1) Letter of application addressed to the Chairman of the CBRC and signed by the Chairman or President (CEO or General Manager) of the foreign bank; (2) Letter of confirmation or letter of approval on the merger, split or other activities issued by the financial supervisory authority of its home country or region; The CBRC headquarters shall confirm the renaming application in a signed letter after receiving the complete application documents. The foreign bank shall, within 5 days after it formally change its name, report to the CBRC headquarters and its relevant local office, and submit the following documents to the CBRC headquarters within thirty days so as to fulfill the formal procedures for changing name(s) of its branch(es) in China: (1) Letter of application addressed to the Chairman of CBRC signed by the Chairman or President (CEO or General Manager) of the new institution; (2) The application form issued by the CBRC and filled in accordance with relevant regulations; (3) Formal approval letter issued by the financial supervisory authority of the home country or region for incorporation of the new institution; (4) Photocopy of the business license of the new institution or the other documents of approval for operating financial business; (5) Letter of guarantee for tax and debt obligations incurred by the branch(es) in China signed by the Chairman or President (CEO or General Manager) of the new institution; (6) Consolidated financial statement of the new institution; (7) The Articles of Association of the new institution; (8) Name list of the board of directors of the new institution; (9) Organizational structure chart of the new institution; (10) Curriculum vitae, documents of identification and academic degree of the president or general manager of the branch(es) in China of the new institution; (11) Power of attorney to the president(s) or General Manager(s) of the branch(es) in China signed by the Chairman or President (CEO or General Manager) of the new institution. The foreign bank shall submit the initial and formal application documents to the CBRC and in the meantime submit photocopies of documents to the relevant CBRC local office. Article 86 The registered capital or operating capital and business scope of a foreign-funded financial institution shall be reconfirmed by the CBRC headquarters after the merger or split of the institution. Article 87 For renaming of a foreign-funded financial insti