Laws of the People's Republic of China

Circular of the People's Bank of China on the Currency Brokerage Companies' Access to Market among Banks

Yin Fa [2006] No. 231

The headquarters of the People's Bank of China in Shanghai and all subsidiary banks and business management departments of the People's Bank of China, central sub branches of the People's Bank of China in all provincial capital cities, central sub branches of the People's Bank of China in all deputy provincial capital cities, all policy banks, state-owned commercial banks, joint-stock banks, National Funding Center among banks and China Government Securities Depository Trust & Clearing Co., Ltd.,

In order to regulate the business of currency brokerage companies, improve the fluidness of interbank bond market and interbank funding market and propel the healthy development of the market among banks, you are hereby informed of the relevant matters concerning the currency brokerage companies' access to the market among banks as follows:

1.

"Currency brokerage company" herein accords with that as defined in Article 2 of the Measures for the Administration of Pilot Currency Brokerage Companies (Decree No. 1 [2005] of the China Banking Regulatory Commission).

2.

Before a currency brokerage company takes on the brokerage business in the market among banks, it shall handle the archival filing formalities in the People's Bank of China and offer the following materials for archival filing:

(1)

The document of the relevant regulatory institution in respect of approval of setting up the currency brokerage company;

(2)

A photocopy of the Financial Business License (duplicate);

(3)

A photocopy of the Enterprise Legal Person Business License (duplicate);

(4)

The Enterprise Constitution;

(5)

The interior risk control system for the planned business of the company;

(6)

The work resumes and relevant qualification certification materials of the senior managers, chief persons-in-charge of the departments, and the person-in-charge of brokerage business;

(7)

The name list of the brokers to undertake the planned business of the company; and

(8)

Other materials as requested by the People's Bank of China.

The People's Bank of China shall present an archival filing Circular to the qualified currency brokerage company within 20 working days after it receives the archival materials which meet the relevant demands.

3.

The person-in-charge of the brokerage business department of a currency brokerage company shall have a working experience of 5 or more years in the financial market and know well the related regulations and business rules concerning market among banks. A broker shall have a working experience of 2 or more years and know well the provisions and business rules concerning market among Banks.

4.

In the market among banks, the business scope of a currency brokerage company is to offer brokerage services in transactions of bonds at an agreed price, repurchase of bonds, discount of instruments, repurchase of instruments, bond forward transactions, RMB interest rate swap transactions, and interbank funding, upon the entrustment of financial institutional investors (hereinafter referred to as the entrusting parties).

5.

When offering brokerage services, a currency brokerage company shall follow the principle of impartiality, fairness, cordiality and good faith and keeping confidential for the clients.

A currency brokerage company shall, in accordance with the principle of careful business, set forth its own business rules and set up an effective internal risk control system and put them to the People's Bank of China for archival purposes.

6.

To offer brokerage services, a currency brokerage company shall conclude a service protocol with the entrusting party and shall anonymously present or ask for quotes upon entrustment of the entrusting party.

After the currency brokerage company transacts successfully, it shall deliver a written circular to both parties concerning transaction, charge the service commissions at a price as prescribed in the service agreement, and deliver quickly the information to the National Interbank Funding Center (hereinafter referred to as the NIFC) for archival purposes.

Where the currency brokerage company cannot bring a transaction, it shall not request the entrusting party to pay any commission, but it may request the entrusting party to give its necessary charges for offering the brokerage service.

7.

A currency brokerage company shall keep carefully the entrustment and transaction records by methods agreed upon by it and the entrusting party.

A currency brokerage company shall rigorously manage the transaction information. It shall not publicly issue any transaction information to the participants of the market among banks (hereinafter referred to as the participants).

8.

In case a currency brokerage company violates the contract during the course of offering brokerage services, where there are any disagreements over the merits of violation of contract or over the responsibilities for breach of contract, the currency brokerage company and the entrusting party may apply for arbitration through negotiation or lodge a complaint in the people's court. The currency brokerage company shall, before 12 o'clock of the next working day after it receives the final result of arbitration or lawsuit, serve the said final result on the NIFC, which shall proclaim on the same day of receipt.

9.

A currency brokerage company shall hand over to the People's Bank of China a written report on the brokerage services in the market among banks of the said quarter or year within 10 working days after each quarter and before March 1 of the next year. A written quarterly report shall include but not limited to the contents in Items (1), (2), (3), (4) and (7). A written annual report shall involve but not limited to the contents in Items (1) through (7):

(1)

The distribution characteristics of the institutions, to which this company transacts successfully;

(2)

The transaction amount of each transaction product by this company and its proportion in the same transactions of the whole market;

(3)

The differentiated descriptions between transaction price of each transaction product by this company and the average market price of the corresponding transaction product;

(4)

The monthly changes of the brokerage business amount of this company;

(5)

The self-evaluation of the brokerage business of the previous year and the plan on the brokerage business of the present year;

(6)

The development advices of the inter-bank market or brokerage business; and

(7)

Other information as requested by the People's Bank of China.

10.

Before April 30 of each year, a currency brokerage company shall regularly release to the market participants its previous-year financial reports audited by and audit report issued by certified public accountants via www.chinamoney.com and www.chinabond.com.cn, covering the audited balance sheets, profit and loss sheets, cash flow statements, notes to the financial accounting statements, as well as the audit opinions.

In case any of the following events takes place, a currency brokerage company shall make an announcement to the participants via the websites www.chinamoney.com and www.chinabond.com.cn and shall report it to the People's Bank of China within 2 working days after the occurrence of this event:

(1)

The decrease of registered capital, combination, split-up, dismiss, trusteeship, suspension of business, applying for bankruptcy;

(2)

Any significant lawsuit subject to the currency brokerage company;

(3)

Over 5% shares of the currency brokerage company are directly or indirectly possessed by the participant(s);

(4)

The currency brokerage company and its participant(s) are directly or indirectly controlled by a same parent company; or

(5)

Other important events as provided for by the People's Bank of China.

11.

To offer brokerage services, a currency brokerage company shall rigorously comply with the relevant regulations of the inter-bank market. Where it fails to abide by the requirements of this Circular and other regulations concerning the market among banks, it shall be punished by the People's Bank of China under the provisions of Article 46 of the Law of the People's Republic of China on the People's Bank of China.

12.

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

The People's Bank of China

July 6, 2006