State Council, Shutting Down of Financial Institutions Regulations

Promulgated: November 23 2001
Effective: December 15 2001

Applicability: The Regulations shall be applicable when the People's Bank of China takes compulsory administrative measures to terminate the operation of and dissolve any financial institution that was originally established with its approval (Article 2).

Main contents: According to the 38-article Regulations, if operation in violation of laws and regulations or mismanagement of a financial institution is sufficient to pose a serious threat to the financial system and the interests of the public, the People's Bank of China (PBOC) shall shut down that financial institution (Article 5). In that case, PBOC shall announce its decision in newspapers and its decision shall be effective immediately (Article 6). The liquidation committee for the financial institution that has been shut down shall be organized by PBOC if it is a commercial bank or by PBOC or the local people's government entrusted by PBOC if a non-bank financial institution (Article 8). During the liquidation period, the senior management of the financial institution that has been shut down shall remain in their positions and may not leave China (Article 10). The liquidation team may delegate the liquidation affairs to a financial institution designated by PBOC but this institution will not assume any of the liabilities of the financial institution that has been shut down (Article 12). The liquidated assets of the financial institution that has been shut down shall be applied to the discharge of liabilities in the following order: (1) personal savings deposits and the interests thereon, (2) debts owed to legal persons and other organizations and (3) shareholder equity interests (Articles 23, 24 and 25). Members of the senior management and staff in the financial institution that has been shut down whose malpractice or misconduct has resulted in the shutting down shall be prosecuted under criminal law or, if their acts are not punishable under criminal law, dismissed from their positions and banned for life from taking any similar positions in financial institutions (Article 30).