Laws of the People's Republic of China

Circular of the People's Bank of China and the Ministry of Finance concerning Printing and Distributing the Interim Measures for the Administration of the Pledge of (Electronic) Savings Bonds

Yin Fa [2006] No. 291

The Shanghai Headquarters of the People's Bank of China, each branch and business management department of the People's Bank of China, central sub-branch of the People's Bank of China in provincial capital city, central sub-branch of the People's Bank of China in Dalian, Qingdao, Ningbo, Xiamen and Shenzhen; the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, Bank of Communications, China Merchants Bank, Bank of Beijing, and the China Government Securities Depository Trust & Clearing Co., Ltd.:

We hereby print and distribute the Interim Measures for the Administration of the Pledge of (Electronic) Savings Bonds (see the Appendix) to you, please abide hereby.

Appendix: Interim Measures for the Administration of the Pledge of (Electronic) Savings Bonds

The People's Bank of China and

The Ministry of Finance

August 18, 2006 Appendix:

Interim Measures for the Administration of the Pledge of (Electronic) Savings Bonds

Article 1

In order to satisfy the financing demand of investors to savings bonds (electronic) (hereinafter referred to as savings bonds), regulate the loan business with the pledge of savings bonds, maintain the legitimate rights and interests of both the lender and the borrower, guard against financial risks, and promote the stable development of treasury bonds market, we hereby formulate the present Measures.

Article 2

The term of "savings bonds" as mentioned in the present Measures refers to the non-negotiable bonds in Renminbi that are released by the Ministry of Finance within the territory of the People's Republic of China, are sold to individual investors via pilot commercial banks (hereinafter referred to as pilot banks) and that register the creditor's rights in an electronic way.

Article 3

The term of "pilot banks" as mentioned in the present Measures refers to the commercial banks that engage in the pilot sales of savings bonds upon approval.

Article 4

The present Measures shall be applied in the case that a borrower obtains Renminbi loans from a pilot bank by using his savings bonds as the pledge.

Article 5

The possession of the loans with the pledge of savings bonds shall be only from the networks of pilot banks that engage in the business of savings bonds (all the said networks within a same city shall be contained within a same city). When the loans with the pledge of savings bonds are granted by a pilot bank, the pledge shall be the savings bonds sold within its own system. As applying for the pledge loans, a borrower shall file an application with the bank where he originally purchased the savings bonds. Upon examination and approval, the borrower and the lender shall conclude a pledge loan contract, the lender shall freeze the creditor's rights attached to the pledged savings bonds and issue a certificate concerning freeze of the creditor's rights to the borrower at the same time.

Article 6

The savings bonds for pledge loans shall be qualified undue savings bonds. All the savings bonds which are involved in ownership dispute, have been reported for loss or have been suspended of payment shall not be regarded as the pledge.

Article 7

When the loans with the pledge of savings bonds are applied for by a borrower, he shall have sufficient creditor's rights attached to savings bonds, and show the lender his valid identity certificate. when applies for the pledge business on behalf of someone else, the written entrustment certificate issued by the creditor as well as the valid identity certificates of the creditor and the agent shall be provided at the same time.

Article 8

The term of the loans with the pledge of savings bonds shall not exceed the expiry date of savings bonds. In case the savings bonds with different terms are used as the pledge, the term of loans shall be determined in light of the latest expiry date.

Article 9

The minimum amount of loans with the pledge of savings bonds under application shall be 5,000 Yuan, and the lender itself shall determine each sum of loans subject to the anticipated proceeds from the savings bonds under pledge, loan rate, and loan term, etc., but it may not be more than 100% of the par value of the savings bonds under pledge.

Article 10

The provisions of the People's Bank of China concerning the administration of interest rates, shall govern the level of interest rates and the method to calculate interests of the loans with the pledge of savings bonds.

Article 11

The loans with the pledge of savings bonds shall be returned on time. The provisions of the People's Bank of China concerning the administration of interest rates shall govern the punitive interest rates and the method for punitive interests for overdue loans. Where the execution of undue savings bonds is needed, the lender may cash them through normal procedures for advanced encashment, deduct a certain proceeds, and collect commissions from the lender according to a certain proportion of the cashed principal. After the principal and interests of loans as well as the punitive interests are repaid, the remaining money shall be refunded to the borrower.

Article 12

The borrower shall, after paying off the principal and interests of loans subject to the pledge loan contract, require the lender to remove the freeze of savings bonds upon the strength of the certificate on freeze of creditor's rights. If the borrower losses the certificate on freeze of creditor's rights, he can inform the lender of the loss.

Article 13

The interests of savings bonds derived from the process of pledge shall be pledged together with the principal.

Article 14

A borrower shall, when applies for the loans with the pledge of savings bonds, go through the formalities for the freeze of creditor's rights attached to savings bonds as well as the formalities for removing the freeze in a timely manner; and if the improper disposal of creditor's rights brings any loss to the lender, the borrower shall assume corresponding liabilities.

Article 15

Where a borrower is dead, his lawful heritor may go through the formalities for transferring and inheriting the related debts subject to the Inheritance Law of the People's Republic of China and other related provisions, and continue to perform the pledge loan contract concluded by the original borrower. If no heritor exists to perform the contract, the lender has the right to dispose the savings bonds under pledge so as to repay the principal and interests of loans.

Article 16

The People's Bank of China, the Ministry of Finance, each branch of the People's Bank of China, and each local bureau of finance may, together with other related departments, carry out supervision over and inspection of the qualifications, scope of networks and business procedures, etc. for the pilot banks to engage in the loan business with the pledge of savings bonds, where necessary.

Article 17

The conditions concerning handling the loan business with the pledge of savings bonds shall be regularly reported by a pilot bank and its branches to the local branch of the People's Bank of China and the local department of finance.

Article 18

A pilot bank shall, formulate the detailed implementation rules and report them to the People's Bank of China and the Ministry of Finance for archival filing according to the present Measures.

Article 19

When handling the loan business with the pledge of savings bonds, any pilot bank shall strictly abide by the present Measures.

Article 20

The power for interpreting the present Measures shall remain with the People's Bank of China and the Ministry of Finance.

Article 21

The present Measures shall enter into force as of the date of promulgation.