People's Bank of China, Administration of Off-book Business Risk by Commercial Banks Guidelines

Issued: November 9 2000
Effective: as of date of issue
Interpreting authority: People's Bank of China
Applicability: The Guidelines apply to Chinese commercial banks, Sino-foreign equity joint venture banks, wholly foreign-owned banks, and branches of foreign banks, within the PRC (Article 23). The Guidelines define off-book business as business conducted by commercial banks that affects profit and loss but that in accordance with existing accountancy rules is not entered on the bank's balance sheet and does not constitute true assets or liabilities, that is guarantee, promissory and financial derivatives trading business (Article 2).

Main contents: The Guidelines state what banks must do to control risk. For example, off-book business must be brought within the system for granting credit based on credit rating of enterprises; and banks must set up a system of information administration for estimating, monitoring and reporting risk for both individual transactions and for overall off-book business. The Guidelines also state what must be done to regulate risk.
Related legislation: PRC, People's Bank of China Law, Mar 18 1995, CLP 1995 No.5 p23 and PRC, Commercial Banking Law, May 10 1995, CLP 1995 No.5 p32