People's Bank of China, PRC Administration of Foreign-funded Financial Institutions Procedures Implementing Rules

Issued: January 29 2002
Effective: February 1 2002

Main contents: According to the Rules, the sole shareholder or largest shareholder of any wholly foreign-owned bank in the PRC must be a commercial bank (Article 4). In the case of a joint venture bank, its sole foreign shareholder or largest foreign shareholder must be a commercial bank (Article 5). The minimum prudential conditions for establishing foreign-funded financial institutions in the PRC are reasonable corporate governance, a prudent risk management system, sound internal controls, effective management information systems and effective measures against money laundering (Article 7).
Where an application is accepted for consideration, the applicant shall collect a formal application form and it will then have six months to prepare the establishment (Article 19). This preparation period can be extended subject to the approval of the local branch of the People's Bank of China (PBOC) (Article 23). Upon completion of preparations, the applicant shall submit the formal application form and other required documents to PBOC (Article 24). If the application is approved, the subject foreign-funded financial institution shall open for business within 90 days, but this period can be extended subject to PBOC approval (Article 28). Where an application for establishment of a foreign-funded financial institution (or its branch) in a PRC city is rejected, the applicant may not apply to establish any operational entity in the same city during the subsequent 12 months after the date of the rejection (Article 20). No application for establishment of any additional branch in the PRC will be accepted until one year has passed after the approval of the last branch in the PRC (Articles 14 and 15).
The required amount of registered capital varies depending on the scope of business of the foreign-funded financial institution concerned. The amount may range from Rmb100 million in a freely convertible currency in the case of a branch office that provides limited foreign exchange services to offshore clients to Rmb1 billion (including at least Rmb400 million in a freely convertible currency) in the case of a wholly foreign-owned or joint venture bank that provides full foreign exchange and Renminbi bank services to all kinds of clients (Articles 31 to 36).
The Rules also lay down requirements concerning qualifications of senior management personnel of foreign-funded financial institutions (Part Four).
Related legislation: PRC, Commercial Banking Law, May 10 1995, CLP 1995 No.5 p32 and PRC Administration of Foreign-funded Financial Institutions Regulations, Dec 12 2001, CLP 2002 No.1 p5
Repealed legislation: PRC, Administration of Foreign-funded financial Institutions Regulations Implementing Rules, Apr 30 1996; Establishment of Branches by Foreign Banks in China Tentative Procedures, Jan 4 1996; Shanghai Pudong New Area, Administration of Pilot Operation of Renminbi Business by Foreign-funded financial Institutions Tentative Procedures, Dec 2 1996; Administration of the Employment Qualifications of the Middle and Senior Management Personnel of Foreign-funded financial Institutions Tentative Provisions, May 15 1997 and Closing of Operational Branches of Foreign Banks Operational Guide, Apr 21 1999