State Council, Administration of Foreign-funded Financial Institutions Regulations

Promulgated: December 20 2001
Effective: February 1 2002

Main contents: The revisions eliminate certain restrictions that were imposed on foreign-funded financial institutions by the earlier version of the Regulations. The stipulation, The State Council shall determine the regions where foreign-funded financial institutions are to be established?has been removed. For a renminbi business, geographic restriction and client limitation are to be set out by the People's Bank of China (PBOC) (Article 19). The basic qualifications for foreign financial institutions to engage in a renminbi business are three years?business operation in China, profitability for two consecutive years prior to the application and meeting the prudential conditions set out by the PBOC; the earlier qualification in respect of business scale is eliminated (Article 20). For establishment of Sino-foreign joint financial institutions, the Chinese partners need not be financial institutions, as required in the past. Foreign-funded banks are permitted to accept deposits from the public (Article 17). Also, all types of foreign-funded financial institutions are now permitted to purchase and sell bonds and foreign exchange negotiable securities not including stocks. The foreign exchange deposits accepted by a foreign-funded financial institution in China as a percentage of its total foreign exchange assets shall not be over 70%, as opposed to 40% in the past (Article 30). The revised Regulations also set out new or clarified supervisory measures. Applications for establishment of foreign-funded financial institutions must be supported by written consent from the banking supervisory authorities of the home countries of the foreign investors (Articles 6 to 10). Changes to business scope or changes in shareholdings by those with a 10% or larger equity interest is subject to examination and approval by the PBOC (Article 33). Level of capital adequacy must be maintained at not less than 8% (Article 25). The PBOC may increase the minimum amounts of registered capital or operating capital as well as the renminbi proportion thereof required of foreign-funded financial institutions if it is needed for prudential supervision (Article 5).
Repealed legislation: State Council, Administration of Foreign-funded Financial Institutions Regulations, Feb 25 1994, CLP 1994