Laws of the People's Republic of China

the Ministry of Finance, the China Banking Regulatory Commission

Circular of the Ministry of Finance and the China Banking Regulatory Commission on Regulating the work of Asset Appraisal in the Non-performing Assets Disposal in Asset Management Companies

Cai Qi [2005] No. 89

Jun. 15,2005

The departments (bureaus) of finance, the banking regulatory offices of all provinces, autonomous regions and municipalities directly under the Central Government, all financial asset management companies:

With a view to regulating the acts of the asset management companies, asset appraisal institutions and certified asset appraisers in the non-performing assets disposal, further clarifying the functions and roles of the asset management companies, asset appraisal institutions and certified appraisers, and promoting the orderly disposal of non-performing assets, you are hereby notified of the relevant issues of asset appraisal in the non-performing assets disposal:

I.

The Requirements for Asset Management Companies in Non-performing Assets Disposal

An asset management company shall, in the non-performing assets disposal, strengthen the institutional improvement and internal control, intensify the management of the asset appraisal and the utilization of the appraisal reports in the non-performing assets disposal, and give full play to the positive roles of the appraisal institutions in the non-performing assets disposal.

1.

The asset management company shall regard the non-performing assets disposal as an important link, and shall, in light of the concrete circumstances of various non-performing assets, entrust an asset appraisal institution to assess the to-be-disposed non-performing assets in strict accordance with the relevant laws and regulations. It shall strictly comply with the appraisal-prior-to-disposal procedure, shall not operate conversely;

2.

The asset management company shall further improve the system for selecting and hiring the best asset appraisal institution. It shall, in strict compliance with the industrial qualifications, choose an asset appraisal institution with an asset appraisal qualification certificate to conduct an appraisal in the non-performing assets disposal. It shall introduce the competition mechanism into the course of selecting and hiring an asset appraisal institution, shall give priority to the asset appraisal institutions with good reputation, qualification and professional ethics and shall not merely consider the lowest appraisal fee as the unique basis for selecting the asset appraisal institution;

3.

The asset management company shall maintain the independence of the appraisal institution, shall actively help it to complete the appraisal, shall not interfere with its normal practice, nor insinuates it and the certified asset appraisers to issue any untrue or false appraisal report;

4.

The asset management company shall use the conclusion of value appraisal or value analysis issued by the appraisal institution reasonably and properly. It shall not use it maliciously.

II.

The Requirements for Appraisal Institutions and Certified Asset Appraisers in the Non-performing Assets Disposal

During the course of disposing non-performing assets, the asset appraisal institution and certified appraisers shall practice in strict accordance with the law, shall ensure the independence, objectivity and impartiality of their practices in pursuance of the relevant appraisal standards and norms, and shall safeguard the public interests, as well as the legitimate rights and interests of all parties concerned to the asset appraisal.

1.

The asset appraisal institutions and certified asset appraisers shall practice in strict accordance with the relevant laws, regulations and asset appraisal rules, scrupulously abide by the professional ethics and shall be diligent and dutiful. They shall follow the necessary asset appraisal procedures in strict compliance with the relevant provisions. Their appraisal measures, appraisal reports and value analysis reports shall conform to the relevant laws, regulations and asset appraisal rules. They shall not cancel any necessary asset appraisal procedure, nor cater for any improper request of the entrusting party or interested parties, nor issue any untrue or false appraisal report;

2.

During the course of appraising non-performing assets, the asset appraisal institutions and certified asset appraisers shall strictly abide by the Guiding Opinions on the Financial Appraisal of Non-performing Assets (Zhong Ping Xie[2005] No. 37) issued by the China Appraisal Society, and shall regulate the acts of appraising non-performing assets;

3.

An appraisal institution shall choose and assign competent professional certified asset appraisers to perform the businesses of appraising non-performing assets, intensify the quality control of performing, strictly implement its internal level-by-level verification procedures, implement the verification responsibility, ensure the quality of appraisal of non-performing assets and protect the legitimate rights and interests of the parties to the asset appraisal.

III.

The Requirements for the Supervision over Appraisal Businesses of the Non-Performing Asset

The Ministry of Finance and China Appraisal Society shall strengthen the supervision over asset appraisal businesses in the non-performing assets disposal. The public finance departments and industrial associations of all provinces, autonomous regions and municipalities directly under the Central Government shall further intensify the supervision over asset appraisal businesses in the non-performing assets disposal, strengthen the quality inspection over the asset appraisals in the non-performing assets disposal, promote the quality of asset appraisal practices in non-performing assets disposal and offer better asset appraisal services in non-performing assets disposal.

Where an asset appraisal institution and its certified asset appraisers issue any untrue or false report by colluding with the entrusting party or the relevant interested party, once found, the appraisal qualification certificate of the asset appraisal institution shall be revoked by the financial department and the certificates of the certified asset appraisers shall be revoked by the China Appraisal Society.

The China Banking Regulatory Commission shall, in pursuance of the law, strengthen the supervision over the appraisal entrustment in the non-performing assets disposal by the asset management companies and over the utilization of the asset appraisals so as to give full play to the positive roles of asset appraisal in the non-performing assets disposal.

An asset management company shall strictly abide by the relevant provisions on the non-performing assets disposal and shall do well the work of non-performing assets disposal. Where anyone insinuates or colludes with the appraisal institution and certified asset appraisers to issue untrue or false appraisal report or uses any appraisal report maliciously, if it is found, the liabilities of the relevant institution and person liable shall be investigated for.