Laws of the People's Republic of China

Circular of the People's Bank of China on the Qualification System and Procedures for Businesses of Foreign-funded Banks

YinFa [2002] No.323 October 18, 2002

The branch banks and business departments of the People's Bank of China:

In accordance with Articles 17, 21 of the Regulations of the People's Republic of China on Foreign-funded Financial Institutions (Order No.340 of the State Council, hereinafter referred to as Regulations), and Articles 44, 45 and 46 of the Detailed Rules for the Implementation of the Regulations of the People's Republic of China on Foreign-funded Financial Institutions (Order [2002] No.1 of the People's Bank of China, hereinafter referred to as Detailed Rules), the relevant issues of qualification system and procedures for businesses of foreign-funded banks are hereby further clarified:

1.

On the qualification system for new businesses of foreign-funded banksArticles 17 and 21 of the Regulations provide that the business scope of foreign-funded banks include 13 categories. To launch a new type of business within that scope, a foreign-funded bank shall file a written application with the People's Bank of China, and may only launch the business after obtaining approval from the People' s Bank of China. The People's Bank of China adopt two methods, namely examination & approval system and record system, for approving new business types of foreign-funded banks, the details are as follows:

(1)

The record system shall apply to the new business types in the categories provided for in the first 12 Items of Article 17 of the Regulations, and the People's Bank of China will, according to the specific situations, apply the examination and approval system with respect to some new business types that have significant impact on the development of bank industry and the financial market. For the types subject to the record system, the Bank Administration of the People's Bank of China shall issue a Notification on Record Reply to the foreign-funded bank; and for the types subject to the examination and approval system, the People's Bank of China shall issue an official reply to the foreign-funded bank.

(2)

If there are special business administration measures for foreign-funded banks with respect to the business types in the categories provided for in the first 12 Items of Article 17 of the Regulations, the qualification system and procedures for such types shall be subject to the special business administration measures. At the present time, such special business administration measures include the Interim Measures for the Administration of On-line Bank Business etc.

(3)

Generally, the record system shall be applied to the "other businesses approved by the People's Bank of China" provided for in Item 13 of Article 17 of the Regulations; and the examination and approval system shall be applied to the products involving securities, insurance and other non-bank financial industries.

If a foreign-funded bank is not sure about the applicable qualification system, it may consult with the local branch of the People's Bank of China before applying for a new business type.

2.

On the qualification procedures for new business types of foreign-funded banks

The corporate head office or major reporting bank of a foreign-funded bank shall submit the bank's application for new business type to the local branch of the People' s Bank of China, and the branch shall, after examination, submit the application to the branch bank or business department of the People's Bank of China for transmission to the Head Office of the People's Bank of China for approval. After the corporate head office or major reporting bank of a foreign-funded bank has been approved to launch a new business type, the bank's branches or other branch banks in China may launch that business type after being authorized. A foreign-funded bank shall report to the local branch of the People's Bank of China when it has been approved to launch a new business type.

3.

On the qualification system and procedures for foreign-funded banks subject to report system

Generally, the report system shall be applied to the business types that are included in the categories provided for in the first 12 Items of Article 17 of the Regulations and that are not new business types. After launching such business types, a foreign-funded bank shall report to the People's Bank of China in a timely manner with regard to the types and properties of the new businesses launched. The report shall be submitted by the corporation or major reporting bank of the foreign-funded bank to the local branch of the People's Bank of China, which shall submit the report to the Head Office of the People's Bank of China on a quarterly basis.

4.

On the intermediary businesses launched by foreign-funded banks

For the intermediary businesses launched by foreign-funded banks, the business scope shall comply with the Regulations and the Detailed Rules, and the qualification system and procedures shall comply with this Circular.

The branch banks and business departments shall transmit this Circular to the relevant central sub-branches and the business branches of foreign-funded banks within their respective jurisdictions.

This is hereby notified.