PRC Administration of Foreign-funded Financial Institutions Regulations Implementing Rules

(Promulgated by the People's Bank of China on January 29 2002 and effective as of February 1 2002.)

PART ONE: GENERAL PROVISIONS

Article 1: These Rules are formulated in accordance with the PRC, Commercial Banking Law and the PRC Administration of Foreign-funded Financial Institutions Regulations (the Regulations).

Article 2: "Foreign capital" referred to in Items One and Four of Article 2 of the Regulations shall mean the capital provided by any institution registered outside the People's Republic of China.

"Foreign banks" referred to in Item Two shall mean any bank registered outside the People's Republic of China and approved or recognized by the financial regulatory authorities of the countries or regions in which they are located.

"Foreign financial institutions" referred to in Items Three and Five shall mean any financial institution registered outside the People's Republic of China and approved or recognized by the financial regulatory authorities of the countries or regions in which they are located.

Article 3: "Foreign-funded legal person institutions" referred to in these Rules shall mean wholly foreign-owned banks, joint venture banks, wholly foreign-owned finance companies and joint venture finance companies under the Regulations.

PART TWO: ESTABLISHMENT AND REGISTRATION

Article 4: The sole shareholder or the largest shareholder of any wholly foreign-owned bank established in accordance with Article 6 of the Regulations must be a commercial bank.

The sole shareholder or the largest shareholder of any wholly foreign-owned finance company established in accordance with Article 6 of the Regulations must be a commercial bank or finance company.

The capital adequacy ratio of any commercial bank referred to in this article shall not be lower than 8%.

Items Two and Three of Article 6 of the Regulations shall apply to the sole shareholder or the largest shareholder.

Article 5: The sole foreign shareholder or the largest foreign shareholder of any joint venture bank established in accordance with Article 8 of the Regulations must be a commercial bank.

The sole foreign shareholder or the largest foreign shareholder of any joint venture finance company established in accordance with Article 8 of the Regulations must be a commercial bank or a finance company.

The capital adequacy ratio of any commercial bank referred to in this article shall not be lower than 8%.

Items Two and Three of Article 8 of the Regulations shall apply to the sole foreign shareholder or the largest foreign shareholder.

Article 6: A "representative office" already established in China by an applicant or by a foreign party to a joint venture referred to in Articles 6, 7 and 8 of the Regulations shall mean a representative office established with the approval of and supervised by the People's Bank of China. References to "the end of the year prior to an establishment application" shall mean the end of the financial year prior to the date of such application.

Article 7: "Prudential conditions" referred to in the Regulations and these Rules shall include at least the following:

1. a reasonable corporate governance structure;

2. a good risk management system;

3. a sound internal control system;

4. an effective information management system;

5. good operating status of the applicant and no record of any material violation or breach; and

6. effective anti-money laundering measures.

Article 8: The "feasibility study report" referred to in Articles 9, 10 and 11 of the Regulations and in Article 16 of these Rules shall include at least the following: the general status of the applicant, an analysis of the market prospects of the institution to be established; plans for future business development of the institution to be established; the organizational and administrative structure of the institution to be established and a forecast of the amount of assets and liabilities and profits for the first three years of its operation.

Article 9: A "business licence (copy)" referred to in the Regulations shall mean a photocopy of the business licence or any other approval document for the operation of financial business.

With the exception of business licences (copies) issued by the industry and commerce administration authorities, the business licence (copy), powers of attorney, a guarantee issued by the head office of the foreign bank undertaking liability for tax and debt obligations of its branch office established in China, etc. shall be notarized by an institution recognized by the country or region in which the applicant is located or authenticated by the Chinese embassy or consulate in that country or region.

Article 10: "Relevant information in respect of the Chinese party to the joint venture" referred to in Item Six of Article 11 of the Regulations means the business licence (copy) of the Chinese party to the joint venture and its annual reports for the last three years.

Article 11: The "annual reports" referred to in the Regulations and these Rules shall have been audited and audit reports issued by an accounting firm recognized in the country or region in which the applicant is located shall be attached to such annual reports. Any annual report prepared in a language other than Chinese or English shall be translated into Chinese or English.

Article 12: "Other materials required for submission by the People's Bank of China" referred to in Articles 9, 10 and 11 of the Regulations shall include at least the following:

1. in respect of applicants who apply to establish foreign-funded financial institutions for the first time, it shall mean information on the financial system and the relevant laws and regulations regarding financial supervision of the country or region in which the applicant is located;

2. the applicant's articles of association; and

3. a chart of the organizational structure, a list of major shareholders, overseas branch institutions and associated companies of the applicant and the group of companies to which it belongs.

Article 13: All application materials required to be submitted under these Rules shall, except for the annual reports, be translated into Chinese if they are prepared in a foreign language.

Article 14: Apart from satisfaction of the conditions set out in Article 7 of the Regulations, a foreign bank that seeks to establish additional branches in China must satisfy the requirement that its existing branches are in sound operation and do not have any record of material violations or breaches.

Any application by a foreign bank to establish additional branches shall not be submitted earlier than one year after the date on which approval was given by the People's Bank of China for the establishment of its last branch.

Article 15: The following conditions shall be satisfied by any wholly foreign-owned bank or joint venture bank that seeks to apply for the establishment of a branch:

1. it has been operating in China for three years or more, it has made profits for two consecutive financial years prior to the application, and it has no record of any material violation or breach;

2. it has a capital adequacy ratio of not less than 8% and its assets are of good quality and quantity;

3. in respect of an application to establish an additional branch, application shall not be made earlier than one year after the date on which the approval was given by the People's Bank of China for the establishment of its last branch;

4. with the establishment of each additional branch, the applicant shall allocate the equivalent of not less than Rmb100 million in freely convertible currencies as working capital for the new branch. The total amount of working capital allocated by the applicant to its branches in China (including any allocation made to the branch intended to be established) shall not exceed 60% of its registered capital; and

5. other prudential conditions stipulated by the People's Bank of China.

Article 16: Where a wholly foreign-owned bank or joint venture bank applies to establish a branch, it shall submit the following materials to the local branch office of the People's Bank of China at the location of the branch. Such materials shall, upon the examination and consent by the local branch office of the People's Bank of China, be forwarded through progressive levels to the head office of the People's Bank of China for examination and approval:

1. an application letter signed by the applicant's chairman of the board or president (chief executive officer or general manager), the contents of which shall include: the name of the branch to be established, the amount of working capital to be allocated and the types of business applied to be engaged in;

2. a board resolution approving the application for the establishment of a branch;

3. a feasibility study report;

4. the business licence (copy);

5. annual reports for the last three years;

6. the applicant's articles of association;

7. other materials required for submission by the People's Bank of China.

Article 17: The application letter to be addressed to the Governor of the People's Bank of China for the establishment of a foreign-funded legal person institution shall be jointly signed by the chairman of the board or president (chief executive officer or general manager) of each investor. The application letter to be addressed to the Governor of the People's Bank of China for the establishment of a foreign bank branch in China shall be signed by the chairman of the board or the president (chief executive officer or general manager) of the applicant.

Article 18: An applicant seeking to establish a foreign-funded financial institution shall submit the application documents set out under Articles 9, 10 and 11 of the Regulations (in triplicate) to the local branch office of the People's Bank of China at the location of the establishment. Such documents shall, upon the examination and consent of the local branch, be forwarded through progressive levels to the head office of the People's Bank of China for examination and approval.

In the event that any applicant fails to satisfy the qualifying conditions specified in Articles 6, 7 and 8 of the Regulations and Articles 14 and 15 of these Rules (other than the prudential conditions), the local branch office of the People's Bank of China shall refuse to accept the application and notify the applicant in writing of the reasons for the refusal. In addition, the local branch shall, through a progressive reporting procedure, notify the head office of the People's Bank of China of the refusal.

Article 19: Within six months from the date on which all the application materials in relation to the establishment of a foreign-funded financial institution are received, the head office of the People's Bank of China shall decide whether or not to accept the application and notify the applicant in writing. Any applicant who receives an acceptance notification shall, within 15 days upon the receipt of the notification, obtain an official application form from the local branch office of the People's Bank of China at the location of the establishment and commence preparatory work. The preparatory period shall be six months.

Any applicant who fails to obtain the official application form within the specified period shall not be allowed to apply for the establishment of any business institution in the same city within one year from the date on which the notification is received.

Article 20: An applicant who receives a refusal notification shall not be allowed to apply for the establishment of any business institution in the same city within one year from the date on which the refusal notification is received.

Article 21: The "principal persons in charge" referred to in Article 14 of the Regulations shall mean the chairman of the board or president (chief executive officer or general manager) of the foreign-funded legal person institution or the head (general manager) of the foreign bank branch.

Article 22: An applicant shall, during the preparatory period, complete the following work and submit the relevant materials to the local branch office of the People's Bank of China at the location of the establishment:

1. the establishment of an internal control system, including control policies and operational procedures for an internal organizational structure, authorization, credit fund management, fund trading, accounting, and computer system;

2. provision of a suitable number of personnel necessary for its business development, in order to meet the requirements for efficient monitoring and controlling of major business risks, for graded examination, approval and review of the business, for division of labour among key positions and for check and balance, etc.;

3. the printing of important business vouchers and receipts for external use;

4. provision of safety and precautionary measures recognized by the relevant departments; and

5. the conduct of an audit of the internal control system, accounting system and the computer system by an accounting firm recognized by the People's Bank of China prior to commencement of business.

Article 23: Any applicant who wishes to apply for an extension of the preparatory period shall apply to the local branch office of the People's Bank of China at the location of the establishment one month prior to the expiry of the preparatory period. The application letter shall be signed by the chairman of the board or president (chief executive officer or general manager) of the foreign-funded legal person institution to be established or the head or general manager of a foreign bank branch.

The People's Bank of China shall not accept any application for extension of the preparatory period if the applicant fails to apply for the extension within the specified period.

The local branch office of the People's Bank of China at the location of the establishment shall decide whether or not to approve the application of extension within 15 days upon receipt of the application materials for extension of the preparatory period. In the event that an application is refused, the local branch shall notify the applicant with reasons for the refusal and report through progressive levels to the head office of the People's Bank of China for examination and approval.

Article 24: Upon the completion of the preparatory work, the applicant shall submit a completed application form together with the documents specified under Article 14 of the Regulations to the local branch office of the People's Bank of China at the location of the establishment. Upon examination and consent of the local branch office of the People's Bank of China at the location of the establishment, the application form and documents shall be submitted through progressive levels to the head office of the People's Bank of China for its examination and approval.

Article 25: Within two months of receipt of a complete set of the official application form and related materials for the establishment of a foreign-funded financial institution, the head office of the People's Bank of China shall decide whether or not to approve the application. The applicant shall, within 15 days from the date of receipt of the notification from the head office of the People's Bank of China, obtain the approval documents for establishing the foreign-funded financial institution from the head office of the People's Bank of China. Any applicant whose application has been refused shall not be allowed to apply for the establishment of a business institution in the same city within one year from the date on which the notification of refusal is received from the head office of the People's Bank of China.

Article 26: Any applicant who has been approved to establish a foreign-funded financial institution shall, upon receipt of the approval document for the establishment of the foreign-funded financial institution from the head office of the People's Bank of China, submit its application for inspection on the commencement of business to the local branch office of the People's Bank of China at the location of the establishment. The application letter shall be signed by the chairman of the board or president (chief executive officer or general manager) of the foreign-funded legal person institution to be established or the head or general manager of the foreign bank branch. Upon the passing of the inspection by the local branch office of the People's Bank of China at the location of the establishment, the applicant shall bring along the opinion on the passing of inspection to and obtain the permit to conduct financial business from the head office of the People's Bank of China. If the foreign-funded financial institution fails the inspection, it may, within 10 days of the receipt of the notification for inspection, apply to the inspection authorities for a re-inspection. Before starting operations a foreign-funded financial institution shall report the date of starting operations in writing to the local branch office of the People's Bank of China.

Article 27: Prior to the commencement of business, a foreign-funded financial institution shall issue public notices in national newspapers designated by the People's Bank of China, as well as local newspapers designated by the local branch office of the People's Bank of China at the location of its establishment.

Article 28: Within 90 days from the date on which the head office of the People's Bank of China approves the establishment, the foreign-funded financial institution shall commence business. In exceptional circumstances, the local branch office of the People's Bank of China at the location of the establishment may approve postponement of the commencement of business.

Any foreign-funded financial institution that wishes to apply for postponement of commencement of business shall submit its application to the local branch office of the People's Bank of China at the location of its establishment within 60 days from the date on which the approval for the establishment is granted. The application letter shall be signed by the chairman of the board or president (chief executive officer or general manager) of the foreign-funded legal person institution or the head or general manager of the foreign bank branch.

The local branch office of the People's Bank of China at the location of the establishment shall decide whether or not to approve the postponement application within 15 days after receipt of the application materials. If the local branch decides not to approve the application, it shall notify the foreign-funded financial institution stating reasons for the disapproval and report through progressive levels to the head office of the People's Bank of China.

The People's Bank of China shall not accept any application for postponement if a foreign-funded financial institution fails to apply for postponement of the commencement of business within the specified period.

The maximum period for postponement of the commencement of business shall be 90 days. In the event that any foreign-funded financial institution fails to commence business at the expiry of the specified period, the original approval for establishment shall automatically become void. The foreign-funded financial institution shall surrender the original and copy of the permit to conduct financial business to the head office of the People's Bank of China. The applicant shall not be allowed to apply for the establishment of a business institution in the same city within one year from the date on which the original approval for the establishment becomes void.

PART THREE: SCOPE OF BUSINESS

Article 29: The "buying and selling of government bonds, financial bonds and foreign currency negotiable securities (other than stocks)" referred to in Item Four of Article 17 and Item Four of Article18 of the Regulations shall include, but not limited to, the following foreign exchange investment businesses: the issue outside China of Chinese and foreign government bonds, bonds issued by Chinese financial institutions and bonds issued by Chinese non-financial institutions.

Article 30: The "creditworthiness investigations and consultancy services" referred to in Item 12 of Article 17 and Item Eight of Article 18 of the Regulations shall mean the creditworthiness investigation and consultancy services relating to banking business.

Article 31: In respect of foreign-funded financial institutions that operate within the business scopes stipulated in Articles 17 and 18 of the Regulations, if it conducts foreign exchange business with institutions outside China, foreign investment enterprises, foreign representative offices resident in China, mainland representative offices of Hong Kong, Macao and Taiwan companies, and foreigners and Hong Kong, Macao and Taiwan compatriots or if it conducts partial foreign exchange business with non-foreign investment enterprises, the following conditions must be satisfied:

1. the working capital of a foreign bank branch shall be no less than Rmb100 million in freely convertible currencies;

2. the registered capital of a wholly foreign-owned bank or joint venture bank shall be no less than Rmb300 million in freely convertible currencies; and

3. the registered capital of a wholly foreign-owned finance company or joint venture finance company shall be no less than Rmb200 million in freely convertible currencies.

Article 32: In respect of foreign-funded financial institutions that operate within the business scopes stipulated in Articles 17 and 18 of the Regulations, if it conducts comprehensive foreign exchange business with all types of customers, the following conditions must be satisfied:

1. the working capital of a foreign bank branch shall be no less than Rmb200 million in freely convertible currencies;

2. the registered capital of a wholly foreign-owned bank or joint venture bank shall be no less than Rmb400 million in freely convertible currencies; and

3. the registered capital of a wholly foreign-owned finance company or joint venture finance company shall be no less than Rmb300 million in freely convertible currencies.

Article 33: In respect of foreign-funded financial institutions that satisfy the conditions under Article 20 of the Regulations and that have been approved to operate within the business scopes stipulated in Articles 17 and 18 of the Regulations, if it conducts foreign exchange business with institutions outside China or if it conducts foreign exchange business and renminbi business with foreign investment enterprises, foreign representative offices resident in China, mainland representative offices of Hong Kong, Macao and Taiwan companies, and foreigners and Hong Kong, Macao and Taiwan compatriots or if it conducts partial foreign exchange business and partial renminbi business with non-foreign investment enterprises, the following conditions must be satisfied:

1. the working capital of a foreign bank branch shall be no less than Rmb200 million, of which the renminbi working capital shall be no less than Rmb100 million and the foreign exchange working capital shall be no less than Rmb100 million in freely convertible currencies;

2. the registered capital of a wholly foreign-owned bank or joint venture bank shall be no less than Rmb400 million, of which the renminbi capital shall be no less than Rmb100 million and the foreign exchange capital shall be no less than Rmb300 million in freely convertible currencies; and

3. the registered capital of any wholly foreign-owned finance company or joint venture finance company shall be no less than Rmb300 million, of which the renminbi capital shall be no less than Rmb100 million and the foreign exchange capital shall be no less than Rmb200 million in freely convertible currencies.

Article 34: In respect of foreign-funded financial institutions that satisfy the conditions under Article 20 of the Regulations and that have been approved to operate within the business scopes stipulated in Articles 17 and 18 of the Regulations, if it conducts comprehensive foreign exchange business with all types of customers or if it conducts renminbi business with foreign investment enterprises, foreign representative offices resident in China, mainland representative offices of Hong Kong, Macao and Taiwan companies, and foreigners and Hong Kong, Macao and Taiwan compatriots or if it conducts partial renminbi business with non-foreign investment enterprises, the following conditions must be satisfied:

1. the working capital of a foreign bank branch shall be no less than Rmb300 million, of which its renminbi working capital shall be no less than Rmb100 million and its foreign exchange working capital shall be no less than Rmb200 million in freely convertible currencies;

2. the registered capital of a wholly foreign-owned bank or joint venture bank shall be no less than Rmb500 million, of which its renminbi capital shall be no less than Rmb100 million and its foreign exchange capital shall be no less than Rmb400 million in freely convertible currencies; and

3. the registered capital of a wholly foreign-owned finance company or joint venture finance company shall be no less than Rmb400 million, of which the renminbi capital shall be no less than Rmb100 million and the foreign exchange capital shall be no less than Rmb300 million in freely convertible currencies.

Article 35: In respect of foreign-funded financial institutions that satisfy the conditions under Article 20 of the Regulations and that have been approved to operate within the business scopes stipulated in Articles 17 and 18 of the Regulations, if it conducts comprehensive foreign exchange business with all types of customers, and if it conducts whole renminbi business with foreign investment enterprises, foreign representative offices resident in China, mainland representative offices of Hong Kong, Macao and Taiwan companies, foreigners and Hong Kong, Macao and Taiwan compatriots, and non-foreign investment enterprises, the following conditions must be satisfied:

1. the working capital of a foreign bank branch shall be no less than Rmb400 million, of which the renminbi working capital shall be no less than Rmb200 million and the foreign exchange working capital shall be no less than Rmb200 million in freely convertible currencies;

2. the registered capital of a wholly foreign-owned bank or joint venture bank shall be no less than Rmb600 million, of which its renminbi capital shall be no less than Rmb200 million and its foreign exchange capital shall be no less than Rmb400 million in freely convertible currencies; and

3. the registered capital of a wholly foreign-owned finance company or joint venture finance company shall be no less than Rmb500 million, of which the renminbi capital shall be no less than Rmb200 million and the foreign exchange capital shall be no less than Rmb300 million in freely convertible currencies.

Article 36: In respect of foreign-funded financial institutions that satisfy the conditions under Article 20 of the Regulations and that have been approved to operate within the business scopes stipulated in Articles 17 and 18 of the Regulations, if it conducts comprehensive foreign exchange business and comprehensive renminbi business with all types of customers, the following conditions must be satisfied:

1. the working capital of a foreign bank branch shall not be less than Rmb600 million, of which its renminbi working capital shall be no less than Rmb400 million and its foreign exchange working capital shall be no less than Rmb200 million in freely convertible currencies;

2. the registered capital of a wholly foreign-owned bank or joint venture bank shall be no less than Rmb1 billion, of which its renminbi capital shall be no less than Rmb600 million and its foreign exchange capital shall be no less than Rmb400 million in freely convertible currencies; and

3. the registered capital of a wholly foreign-owned finance company or joint venture finance company shall be no less than Rmb700 million, of which its renminbi capital shall be no less than Rmb400 million and its foreign exchange capital shall be no less than Rmb300 million in freely convertible currencies.

Article 37: "Partial foreign exchange business with non-foreign investment enterprises" referred to in Articles 31 and 33 of these Rules shall mean the re-deposits of foreign exchange loans, export settlement, import settlement of loans and remittances from overseas conducted with non-foreign investment enterprises.

"Partial business of non-foreign investment enterprises" referred to in Articles 33 and 34 shall mean the ancillary renminbi loans and re-deposits thereof, and security to non-foreign investment enterprises that receive foreign exchange loans from the foreign-funded financial institution.

Article 38: Items One and Two of Article 20 of the Regulations shall mean that the applicant shall have operated an institution in the city where it seeks to conduct or expand its renminbi business for three years or more, and that such an institution has made profits in the two consecutive years prior to the application.

Article 39: A foreign-funded financial institution seeking to conduct renminbi business or enlarge the scope of its target customers shall submit the following materials (in triplicate) to the local branch office of the People's Bank of China at the location of its establishment, and upon examination and consent by the local branch, the application shall be reported through progressive levels to the head office of the People's Bank of China for examination and approval:

1. a letter of application addressed to the Governor of the People's Bank of China signed by the applicant's director or president (chief executive officer or general manager), the contents of which shall include concrete information on conducting renminbi business or the enlargement of the target customer scope, and proposed increase of registered capital or working capital to be allocated from the head office;

2. a feasibility study report;

3. the proposed amendments to the articles of association (relevant to foreign-funded legal person institutions only);

4. the operating procedures and internal control system of the business to be conducted;

5. a copy of the permit to conduct financial business of the foreign-funded financial institution; and

6. other materials required for submission by the People's Bank of China.

Article 40: A foreign-funded financial institution shall complete the following preparatory work and submit the relevant materials to the local branch office of the People's Bank of China within four months of the date on which the People's Bank of China approves it to conduct renminbi business or enlarge the scope of its target customers:

1. remittance of the increased capital or working capital into China, and submission of the evidence for capital verification following verification by an accounting firm recognized by the People's Bank of China;

2. provision of a suitable number of personnel necessary for business development;

3. printing of important business vouchers and receipts for external use; and

4. provision of safety and precautionary measures recognized by the relevant departments.

If the foreign-funded financial institution fails to complete the preparatory work within the four months' period, the original approval issued by the head office of the People's Bank of China shall be automatically void.

Article 41: Upon completion of the preparation work, the foreign-funded financial institution shall submit an inspection application to the local branch office of the People's Bank of China at the location of its establishment. Such inspection application shall be signed by a director or president (chief executive officer or general manager) of a foreign-funded legal person institution or by the head or general manager of a foreign bank branch. Upon passing the inspection, the foreign-funded financial institution shall submit the opinion on the passing of inspection and evidence of capital verification report to the head office of the People's Bank of China and apply for a revised permit to conduct financial business. If the foreign-funded financial institution fails the inspection, it may, within 10 days of the receipt of the notification for inspection, apply to the inspection authorities for a re-inspection.

Article 42: Prior to conducting the business set out in the approval documents, the foreign-funded financial institution shall issue a public notice in national newspapers designated by the head office of the People's Bank of China, as well as local newspapers designated by the local branches of the People's Bank of China at the location of its establishment.

Article 43: The geographic area where foreign-funded financial institutions can conduct renminbi business shall be the cities in which foreign-funded financial institutions have been permitted to conduct renminbi business.

Article 44: "New types of business" referred to in Article 21 of the Regulations shall mean types of financial business that are not provided by any bank or financial company in China, or those that are being provided by banks or finance companies in China but that bear relatively high operational risks.

Any foreign-funded financial institution applying to conduct any new types of business shall submit the following materials (in triplicate) to the local branch office of the People's Bank of China at the location of its establishment, and upon the examination and consent by the local branch office of the People's Bank of China, the application shall be submitted through progressive levels to the head office of the People's Bank of China for examination and approval:

1. a letter of application signed by the authorized signatory of the head office of the foreign-funded financial institution;

2. a detailed introduction of the business to be conducted and the preparation necessary for conducting such business, including any operational procedures, risks/profits analysis, control measures, specialist personnel and equipment of computer system; and

3. other materials required for submission by the People's Bank of China.

The head office of the People's Bank of China shall decide whether or not to approve the application within 60 days of receipt of a complete set of the above materials.

Article 45: If a foreign-funded financial institution wishes to apply to conduct any new business at two or more branches in China, the head office of the foreign-funded legal person institution or the chief reporting branch of the foreign bank may consolidate the application materials and submit them to the local branch office of the People's Bank of China at the location of its establishment, and upon examination and consent by the local branch, the application materials will be submitted through progressive levels to the head office of the People's Bank of China for examination and approval.

Article 46: The application procedures prescribed in Article 44 of the Rules shall apply to foreign-funded financial institutions that seek to apply to conduct "other business approved by the People's Bank of China" stipulated under Item 13 of Article 17 and Item 10 of Article 18 of the Regulations.

Article 47: A foreign-funded financial institution that operates a product or service within its approved business scope and type shall record this with the local branch office of the People's Bank of China at the location of its establishment.

Article 48: Foreign-funded financial institutions may conduct the sale and reconciliation of foreign exchange in accordance with relevant provisions.

Article 49: Wholly foreign-owned banks, joint venture banks and foreign bank branches that have been approved to conduct renminbi business may conduct renminbi inter-bank borrowing business in accordance with the relevant provisions of the People's Bank of China.

PART FOUR: ADMINISTRATION OF QUALIFICATIONS

Article 50: The senior management personnel of a foreign-funded financial institution shall satisfy the following basic conditions:

1. they must be familiar and comply with China's laws and regulations on financial regulation;

2. they shall possess professional knowledge, work experience, organization and management abilities that correspond to the position; and

3. they shall have no record of improper conduct.

Article 51: The following persons shall not hold any senior management position in a foreign-funded financial institution:

1. persons having any criminal record;

2. persons having been seriously penalized due to violation of the law;

3. persons having taken major responsibility for or having been the person directly responsible for the bankruptcy, serious violation of regulations or revocation of the permit to conduct financial business or the business licence of any financial institution, enterprise or company in which he was employed, in each case within the last five years; and

4. persons having caused heavy losses to the financial institution or any other enterprise or company in which he was employed as a result of his material error in the past five years.

Article 52: The People's Bank of China shall apply two systems: the verification and approval system and the record filing system in examining senior management personnel of foreign-funded financial institutions.

Article 53: A verification and approval system is applicable in examining senior management personnel of foreign-funded financial institutions who assume the following positions. Such personnel shall satisfy the following conditions:

1. in respect of persons who assume the position of the chairman of the board or president (general manager) of a foreign-funded financial institution, such persons shall have 10 years or more of experience in the financial industry or 15 years or more of related work experience in the economic sector (of which five years or more of such experience shall be in the financial industry), and shall have been in the position of a business department manager (or equivalent) or a higher position for three years or more;

2. in respect of persons who assume the position of vice chairman of the board or vice president (deputy general manager) of a foreign-funded financial institution or the president (general manager) of a foreign bank branch, such persons shall have five years or more of experience in the financial industry or 10 years or more of related work experience in the economic sector (of which three years or more of such experience shall be in the financial industry), and shall have been in the position of a business department manager (or equivalent) or a higher position for two years or more;

3. in respect of persons who assume the position of deputy president (deputy general manager) of a foreign bank branch or the president of a sub-branch, such person shall have four years or more of experience in the financial industry or six years or more of related work experience in the economic sector (of which two years or more of such experience shall be in the financial industry); and

4. possess a bachelor degree or above; if such person does not hold a bachelor degree, such person shall correspondingly be required to possess an additional six years or more of experience in the financial industry or eight years or more of related work experience in the economic sector (of which four years or more shall be in the financial industry).

Article 54: The head office of the People's Bank of China shall be responsible for the verification and approval of or revocation of qualifications in respect of the following positions:

1. the chairman of the board or president (general manager) of a foreign-funded legal person institution; and

2. the head (general manager) of a foreign bank branch.

The local branch office of the People's Bank of China (business administration department) shall be responsible for the verification and approval of or revocation of qualification in respect of the following positions:

1. the vice chairman of the board or vice president (deputy general manager) of a foreign-funded legal person institution; and

2. the deputy head (deputy general manager) of a foreign bank branch and the head of a sub-branch.

Article 55: If the verification and approval system applies to examine the qualifications of any senior management personnel, the applicant shall submit the following materials (in triplicate) to the local branch office of the People's Bank of China at the location of its establishment:

1. letter of application addressed to the People's Bank of China signed by the authorized signatory of the applicant. If the application needs to be verified by the head office of the People's Bank of China, the letter of application shall be addressed to the Governor of the People's Bank of China. If the application needs to be verified by a branch or business administration department of the People's Bank of China, it shall be addressed to the head of the relevant branch or the director of the business administration department of the People's Bank of China;

2. power of attorney in respect of the authorization by the applicant of the signatory to sign on its behalf;

3. résumé of the candidate;

4. copies of the identification certificate and academic certificate of the candidate;

5. shareholders' resolution if so required in the articles of association of the foreign-funded legal person institution;

6. statement signed by the candidate stating that he has no record of improper conduct; and

7. other materials required by the People's Bank of China.

Article 56: The term of office of any senior management personnel to which the verification and approval system applies shall be two years or more. During the term, such person shall not concurrently hold any management position at any other business institution, unless otherwise approved by the People's Bank of China. Senior management personnel of foreign-funded financial institutions shall not concurrently hold any position in a representative office in China.

Article 57: "Senior management personnel" referred to in Item 7 of Article 33 of the Regulations shall mean those senior management personnel to which the verification and approval system applies.

Article 58: The record filing system shall apply to examine senior management personnel of foreign-funded financial institutions who assume the following positions:

1. director, assistant to the president (general manager), chief financial officer, chief auditor, senior compliance manager and chief operational officer of a foreign-funded legal person institution;

2. chief accountant, compliance manager and chief operational officer of a foreign bank branch;

3. deputy head(s) of a sub-branch established by a foreign bank branch; and

4. any other senior management personnel of which the People's Bank of China considers necessary to be recorded for the record.

Article 59: If the record system is applicable to examine a senior management personnel, the foreign-funded financial institution shall submit the following materials to the local branch office of the People's Bank of China at the location of the establishment:

1. power of attorney in respect of the authorization by the applicant of the signatory to sign on its behalf;

2. résumé of the candidate;

3. copies of the identification certificate and academic certificate of the candidate;

4. statement signed by the candidate stating that he has no record of improper conduct; and

5. other materials required by the People's Bank of China.

Article 60: The resume, copies of identification certificate and academic certificate of the candidate shall be signed by the authorized signatory of the applicant.

Article 61: In the event that the president (general manager) of a foreign-funded financial institution or the head of its sub-branch is absent from his post for a continuous period of one month or more, the local branch office of the People's Bank of China at the location of its establishment shall be notified. Successors shall be appointed if any of them is absent from his post for three consecutive months or more.

Article 62: The People's Bank of China may, depending on the seriousness of the matter and the consequences, revoke the qualification of any senior management personnel who is responsible for any of the following events for a certain period or even permanently:

1. being pursued for criminal liability according to law;

2. refusing, interfering, obstructing or seriously affecting the legitimate regulation by the People's Bank of China;

3. unsound internal management and control systems or ineffective implementation of supervision, causing major loss of assets or the occurrence of a serious financial criminal case;

4. operating in serious violation of laws and regulations, unsound internal control or prolonged poor business management causing the institution in which he is employed to be taken over, merged or declared bankrupt;

5. prolonged poor business management, causing serious losses to the institution where he is employed;

6. in respect of any senior management personnel who is already employed by the foreign-funded financial institution, the discovery by the People's Bank of China of any previous violation of laws and regulations by such a person or any other circumstance that would make such person unsuitable for taking up a senior management position; or

7. any other circumstances prescribed by the People's Bank of China.

Article 63: If the qualification for any senior management position needs to be verified and approved by the head office of the People's Bank of China, the People's Bank of China shall render a decision of whether or not to approve the qualification application within 90 days from the receipt of a complete set of application materials. If the qualification of any senior management position needs to be verified by the local branch or the business administration department of the People's Bank of China, the People's Bank of China shall render its decision of whether or not to approve the qualification application within 45 days from the receipt of a complete set of application materials. If it rejects the application, it shall notify the applicant in writing and set out reasons for the rejection.

If the qualification of senior management personnel needs to be recorded with the local branch office of the People's Bank of China, the application shall be deemed to be approved if the People's Bank of China does not make any written objection within 30 days from the receipt of a complete set of application materials.

PART FIVE: SUPERVISION AND ADMINISTRATION

Article 64: A foreign bank that has set up two or more branches in China shall appoint a branch as its reporting branch, which shall be responsible for the consolidated reporting of the branches in China.

Article 65: "Interest-earning assets" referred to in Article 24 of the Regulations shall include foreign exchange interest-earning assets and renminbi interest-earning assets.

30% of the foreign exchange working capital of a foreign bank branch shall be placed in a foreign currency term deposit with a term of not less than six months as foreign exchange interest-earning assets. 30% of the renminbi working capital shall be placed as renminbi interest-earning assets in the form of renminbi State bonds or a renminbi term deposit with a term not less than six months.

renminbi and foreign currency term deposits with a term not less than six months shall be made with three or less than three large-scale wholly Chinese-owned commercial banks with steady and healthy operation in China. Rates applicable to term deposits of interest-earning assets shall be determined by the relevant parties in accordance with relevant provisions. Foreign bank branches shall report to the local branch office of the People's Bank of China at the location of the establishment as to which bank it has deposited interest-earning assets and the applicable interest rates. Foreign bank branches shall not use any of the interest-earning assets held in the form of fixed-term deposits without the approval of the local branch office of the People's Bank of China at the location of their establishment. Banks with which interest-earning assets are deposited shall handle all matters relating to changes in the interest-earning assets in accordance with the approval documents of the People's Bank of China.

Article 66: "Capital" referred to in Articles 26 and 28 of the Regulations shall mean the sum of registered capital, capital reserves, surplus reserves, undistributed profits, reserves for ordinary loan loss, revaluation reserves and long term secondary bonds of a term of five years or more, less investments in relation to unconsolidated institutions.

The "sum of working capital and reserve funds etc." referred to in Article 28 of the Regulations shall mean the sum of working capital, undistributed profits and reserves for ordinary loan loss.

"Risk assets" referred to in Article 28 of the Regulations shall mean weighted risk assets (whether on balance sheet or off balance sheet) calculated in accordance with the relevant provisions issued by the People's Bank of China in relation to weighted risk assets.

The calculation, testing and verification methods for capital adequacy ratio referred to in Article 25 of the Regulations shall be implemented in accordance with relevant provisions issued by the People's Bank of China in relation to capital adequacy ratio.

The ratio provided under Article 28 of the Regulations shall be calculated separately for each branch office of a foreign-funded financial institution in China and verified for each quarter, based on the average balance verified at the end of each month.

The People's Bank of China may make special request for the capital adequacy ratio of each foreign-funded legal person institution based on the risk that each has to bear.

Article 67: "Affiliated enterprises" referred to in Article 26 of the Regulations shall mean an enterprise or enterprises on one side with the ability to, directly or indirectly, control or jointly control an enterprise or enterprises on the other side, or to exert substantial influence on an enterprise or enterprises on the other side, or that enterprises on two or more sides are jointly controlled by an enterprise or enterprises on one side.

"Credit amount" for the purposes of Article 26 of the Regulations shall include both on and off balance sheet items.

Article 68: "Liquid assets" referred to in Article 29 of the Regulations shall mean cash, gold, deposits with the People's Bank of China, inter-bank deposits, inter-bank loans that shall mature within one month, net assets from inter-branch transactions abroad and from transactions with offshore subordinate institutions, discounts and other purchased bills that shall mature within one month, other account receivables that shall mature within one month, loans that shall mature within one month, bonds that shall mature within one month and other assets that can be realized within one month. Deductions shall be made to the above items for items that are not expected to be recoverable.

"Liquid liabilities" referred to in Article 29 of the Regulations shall mean deposits that shall mature within one month, inter-bank borrowings that shall mature within one month, accounts payable that shall mature within one month, net liabilities from inter-branch transactions abroad and from transactions with offshore subordinate institutions and other liabilities that shall mature within one month.

Foreign-funded financial institutions shall calculate and maintain, on a daily basis, the liquidity ratio in both renminbi and foreign currencies set out in Article 29 of the Regulations. The People's Bank of China shall verify the liquidity ratio of foreign-funded legal person institutions on a consolidated basis, and in respect of foreign bank branches on an individual basis.

Article 69: "Total amount of foreign exchange deposits taken up in China" accepted in China referred to in Article 30 of the Regulations shall include foreign exchange interbank and non-interbank deposits. The method of calculating "total foreign exchange assets in China" is as follows:

Total foreign exchange assets in China = total foreign exchange assets - foreign exchange interbank offshore transactions (assets) - foreign exchange transactions of offshore subordinate institutions - overseas foreign exchange loans - offshore interbank foreign exchange deposits - offshore interbank foreign exchange loans - offshore foreign exchange investments.

The following foreign exchange investments shall not be included in offshore foreign exchange investments: Chinese government bonds issued abroad, bonds issued by Chinese financial institutions and bonds issued by Chinese non-financial institutions.

The ratio specified in Article 30 of the Regulations shall be examined on the basis of the balance at the end of each month for each institution individually.

Article 70: The transfer of any credit asset from the head office or the associated bank of a foreign-funded financial institution must be approved by the local branch office of the People's Bank of China at the location of its establishment.

Article 71: Foreign-funded financial institutions shall comply with the provisions of the People's Bank of China in relation to asset classification.

Article 72: Foreign-funded financial institutions shall adopt a prudential accounting system.

Article 73: Foreign-funded financial institutions shall not grant credit to related persons on conditions that are more preferential than those that apply to any other borrower in respect of similar credit.

A related person shall, for the purposes of this article, mean: (1) directors, supervisors, managerial personnel, credit business personnel and their close relatives of a foreign-funded financial institution; (2) the companies, enterprises and other economic entities in which the persons specified above invest or undertake a senior management position; or (3) shareholders and the affiliated enterprises of a foreign-funded legal person institution.

Article 74: The ratios set out in Articles 26 and 27 of the Regulations shall be examined on the basis of the balance at the end of each quarter.

Article 75: A "Chinese certified accountant" referred to in Article 32 of the Regulations shall mean an accountant registered in China practising in an accounting firm that has been examined by the People's Bank of China and the Ministry of Finance and that is permitted to engage in finance-related auditing business.

Article 76: In the event of an adjustment and/or transfer of the registered capital of a foreign-funded legal person institution, or change in any shareholder who holds 10% or more of its total capital or shares, or the application by any foreign bank for adjustment of the working capital of its branches in China, the following materials shall be submitted to the local branch office of the People's Bank of China at the location of its establishment. Upon examination and consent by the local branch office of the People's Bank of China, the same materials shall be forwarded through progressive levels to the head office of the People's Bank of China for approval:

1. letter of application signed by the applicant's chairman of the board or president (chief executive officer or general manager);

2. board resolution of the foreign-funded legal person institution in relation to the adjustment and/or transfer of the registered capital, or change in shareholders;

3. in respect of changes in the amount of capital investment or shareholdings of the foreign investors of any foreign-funded legal person institution, the board resolution of the foreign investors and the opinion of the financial regulatory authorities in charge of the country or region in which the foreign investor is located; and

4. other materials required for submission by the People's Bank of China.

Article 77: In respect of a proposed change of name of its branch office in China due to the merger or division of any foreign bank, the procedures for the official name change may be split into two steps or be conducted directly:

The head office of the foreign bank may submit its initial application to the head office of the People's Bank of China together with the following materials:

1. A letter of application addressed to the Governor of the People's Bank of China and signed by the chairman of the board or president (the chief executive officer or general manager) of the foreign bank; and

2. A letter of acknowledgement or approval document in relation to the merger or division issued by the financial regulatory authorities of the country or region where the foreign bank is located.

Upon receipt of a complete set of the application materials, the head office of the People's Bank of China shall confirm the application for name change in the form of a signed letter.

Within 60 days after the official change of its name, the foreign bank shall submit the following materials to the head office of the People's Bank of China in order to complete the procedures to officially change the names of its branches in China:

1. letter of application signed by the chairman of the board or president (chief executive officer or general manager) of the new institution;

2. the application form printed by the People's Bank of China completed in accordance with the provisions;

3. the official approval document issued by the financial regulatory authorities of the country or region where the new institution is located;

4. the business licence (copy) of the new institution;

5. a guarantee to undertake the liability for tax and debts of its branch offices in China issued by the new institution and signed by the chairman of the board or president (chief executive officer or general manager) of the new institution;

6. the consolidated financial statements of the new institution;

7. the articles of association of the new institution;

8. a list of directors of the new institution;

9. the organizational structure chart of the new institution;

10. the résumé, proof of identification and academic record of the head or general manager of the branch office of the new institution in China; and

11. the power of attorney in favour of the head or general manager of the branch in China signed by the chairman of the board or president (chief executive officer or general manager) of the new institution.

The foreign bank shall submit copies of the initial letter of application and copies of the official application materials to the local branch office of the People's Bank of China at the location of establishment of its branch in China.

Article 78: The registered capital, working capital and business scope of foreign-funded financial institutions following a merger or division shall be re-verified by the head office of the People's Bank of China.

Article 79: In the event of an application for name change due to other reasons, a letter of application signed by the chairman or president (chief executive officer or general manager) of the foreign-funded financial institution shall be submitted to the head office of the People's Bank of China with a copy of the same to the local branch office of the People's Bank of China at the place where it is located.

Article 80: In the event of a change in business site within the same city, a foreign-funded financial institution shall submit the following materials to the local branch office of the People's Bank of China at the place where it is located and, after the examination and approval of the local branch, forward the same through progressive levels to the head office of the People's Bank of China:

1. a letter of application addressed to the local branch office of the People's Bank of China and signed by the chairman or president (chief executive officer or general manager) of the foreign-funded legal person institution or the president or general manager of a foreign bank branch; and

2. other materials required for submission by the People's Bank of China.

The local branch office of the People's Bank of China at the place where the foreign-funded financial institution is located shall conduct inspection in accordance with relevant provisions. If the inspection is passed, the local branch office of the People's Bank of China shall issue an approval document in relation to the change of business site within the same city to the foreign-funded financial institution. If the inspection is not passed, the local branch office of the People's Bank of China shall issue an opinion on failing of inspection. If the foreign-funded financial institution fails the inspection, it may, within 10 days of the receipt of the notification for inspection, apply to the inspection authorities for a re-inspection.

Article 81: Any foreign-funded financial institution that has obtained approval in respect of its change of registered capital or working capital, or the change of any shareholder who holds more than 10% of its total capital or shares, shall within 30 days upon receipt of the approval document from the head office of the People's Bank of China, appoint a registered accounting firm recognized by the People's Bank of China to conduct capital verification and submit the capital verification certificate to the local branch office of the People's Bank of China at the place where it is located.

Article 82: In an application of a foreign-funded legal person institution to amend its articles of association, the following materials shall be submitted to the local branch office of the People's Bank of China at the place where the foreign-funded legal person institution is located that, upon examination and consent by the local branch, will be forwarded through progressive levels to the head office of the People's Bank of China for examination and approval:

1. a letter of application signed by the applicant's chairman or president (chief executive officer or general manager); and

2. shareholders' resolution or board resolution.

Article 83: In the event that any changes have to be made to the permit to conduct financial business due to any matter specified under Article 33 of the Regulations, the foreign-funded financial institution shall proceed to effect such changes with the head office of the People's Bank of China within 60 days of receipt of the official approval document. In the event that capital verification is required, the foreign-funded financial institution shall bring along the capital verification report to replace the permit to conduct financial business at the head office of the People's Bank of China. In the event that inspection is required, the foreign-funded financial institution shall bring along the opinion on passing the inspection issued by the local branch office of the People's Bank of China at the place where it is located to the head office of the People's Bank of China to replace the permit to conduct financial business. The foreign-funded financial institution shall bring along its permit to conduct financial business to the administration for industry and commerce to change its registration and to replace its business licence.

In the event that any changes have to be made to the permit to conduct financial business due to any matter specified under Article 33 of the Regulations, the foreign-funded financial institution shall publish a public notice in the national newspapers designated by the head office of the People's Bank of China, as well as local newspapers designated by the relevant local branch office of the People's Bank of China at the place where it is located. The public notice shall be published within 30 days after the new business licence comes into effect. The foreign-funded financial institution shall report the contents of the public notice in writing to the local branch office of the People's Bank of China at the place where it is located three days prior to the date of such notice.

Article 84: Foreign-funded financial institutions shall report to the local branch office of the People's Bank of China at the place where it is located immediately upon the occurrence of the following events:

1. serious problems in relation to the financial status or operations of the foreign-funded financial institutions;

2. major adjustments to business strategy;

3. the passing of important board resolutions of the foreign legal person institution;

4. a change in shareholder who holds 10% or less of the total capital or shares of a foreign-funded financial institution;

5. any change to the articles of association, registered capital or registered address of either the head office of a foreign bank branch, or the investors of any foreign-funded legal person institution;

6. reorganization such as merger and division and any changes to the chairman or president (chief executive officer or general manager) of the head office of a foreign bank branch or the investors of a foreign-funded legal person institution;

7. serious problems in relation to the financial status or operations of the head office of a foreign bank branch or the investors of a foreign-funded legal person institution;

8. any major changes in the laws and regulations of the place where the head office of a foreign bank branch or the foreign investor of a foreign-funded institution is registered;

9. except for reasons of force majeure, foreign-funded financial institutions shall notify the local branch office of the People's Bank of China at the place where it is located seven working days prior to any suspension of its business on dates that are not statutory holidays; and

10. other events required by the People's Bank of China.

Article 85: At the end of each financial year, a foreign-funded financial institution shall appoint an accounting firm recognized by the People's Bank of China to conduct an annual audit and submit the audit report and management proposal to the local branch office of the People's Bank of China at the place where it is located. Foreign-funded legal person institutions and foreign banks with two or more branches in China shall further appoint an accounting firm recognized by the People's Bank of China to conduct an audit on all their business institutions in China on a consolidated basis and submit the auditor's report and management proposal to the local branch office of the People's Bank of China at the location of establishment of the head office of the foreign-funded legal person institution or the chief reporting branch of the foreign bank.

Article 86: The People's Bank of China and its local branches may, where necessary, appoint an accounting firm to conduct an audit on the operational and financial condition of a foreign-funded financial institution.

Article 87: Foreign-funded financial institutions that conduct RMB business with customers in areas outside the place where it is located shall report the situation to the local branch office of the People's Bank of China at the place where it is located within five business days of the beginning of each quarter.

Article 88: Matters of sale and reconciliation of foreign exchange such as changes between renminbi and foreign currency of the working capital of a foreign-funded financial institution and changes by the institution of renminbi profits into foreign currency for remittance outside China, and other matters related to foreign exchange examination and approval shall be examined and verified by the State Administration of Foreign Exchange and its branches.

Article 89: All matters of foreign-funded financial institutions in relation to foreign exchange administration shall be conducted in accordance with relevant provisions of the State Administration of Foreign Exchange.

PART SIX: DISSOLUTION AND LIQUIDATION

Article 90: The term "dissolution and liquidation" referred to in the Regulations shall include the following circumstances:

1. Foreign-funded legal person institutions shall be dissolved voluntarily under any of the following circumstances upon obtaining approval from the People's Bank of China:

(i) expiration of the term of business specified in the articles of association or the occurrence of any dissolution event specified in the articles of association;

(ii) a resolution for dissolution adopted at a shareholders' meeting or a board meeting; or

(iii) dissolution as a result of merger or division.

2. closure of a branch in China of a foreign bank, wholly foreign-owned bank or joint venture bank approved by or at the order of the People's Bank of China;

3. the revocation of the permit to conduct financial business of the foreign-funded legal person institution by the People's Bank of China; or

4. the foreign-funded legal person institution being declared bankrupt pursuant to law.

Article 91: A foreign-funded legal person financial institution that applies for voluntary dissolution shall submit the following materials to the local branch office of the People's Bank of China at the place where it is located, and upon examination and consent by the local branch, the same materials shall be forwarded through progressive levels to the head office of the People's Bank of China for approval:

1. letter of application signed by the chairman or president (chief executive officer or general manager) of the applicant;

2. shareholders' resolution or board resolution;

3. letter of confirmation on voluntary dissolution signed by the chairman of the board or president (chief executive officer or general manager) of each investor; and

4. other materials required for submission by the People's Bank of China.

The head office of the People's Bank of China shall decide whether or not to approve the application within 60 days of receipt of a complete set of the required materials.

Article 92: A foreign bank, wholly foreign-owned bank or a joint venture bank applying to close its branch in China shall submit the following materials to the branch of the People's Bank of China at the place where it is located. Upon examination and consent by the local branch, the same materials will be forwarded through progressive levels to the head office of the People's Bank of China for examination and approval:

1. a letter of application signed by the chairman of the board or president (chief executive officer or general manager);

2. in respect of an application by a wholly foreign-owned bank or a joint venture bank, the board resolution;

3. an opinion on the application issued by the financial regulatory authorities of the place where the foreign bank is registered; and

4. other materials required for submission by the People's Bank of China.

The head office of the People's Bank of China shall decide whether or not to approve the application within 60 days of receipt of a complete set of the required materials.

Article 93: From the date on which the decision of the People's Bank of China becomes effective to approve the voluntary dissolution of a foreign-funded legal person institution, the closure of a branch in China of a foreign bank, wholly foreign-owned banks or a joint venture bank, or the closure of such a branch at the order of the People's Bank of China, the foreign-funded financial institution that is the subject of such approvals shall immediately cease their business activities and surrender its permit to conduct financial business. The senior managerial personnel, board of directors and shareholder meeting of the foreign-funded legal person institution shall immediately cease to exercise their powers. A liquidation committee shall be established within 15 days.

Article 94: The members of the liquidation committee shall include the president (general manager), the chief accountant, a Chinese registered accountant and any other personnel appointed by the People's Bank of China. The liquidation committee of a foreign-funded legal person institution shall also include a shareholder representative and the chairman of the board. Members of the liquidation committee shall be approved by the relevant local branch office of the People's Bank of China at the place where it is located.

Article 95: The liquidation committee shall provide a written notice to the relevant authorities, such as the administration for industry and commerce, taxation authorities and labour and social security department.

Article 96: Any other liquidation matters in relation to the voluntary dissolution of a foreign-funded legal person institution, the closure of a branch in China of a wholly foreign-owned bank, a joint venture bank and a foreign bank shall be conducted in accordance with the relevant provisions of the PRC, Company Law.

Article 97: The local branch office of the People's Bank of China at the location of a foreign-funded financial institution to be dissolved or closed shall be responsible for the supervision of the dissolution and liquidation processes and shall report, through progressive levels, any major issue and the result of the liquidation to the head office of the People's Bank of China.

Article 98: Within 30 days of its establishment, the liquidation committee shall appoint an accounting firm recognized by the People's Bank of China to conduct an audit and shall submit an audit report to the relevant local branch office of the People's Bank of China within 60 days of the appointment.

Article 99: From the date on which the application materials in relation to dissolution or closure are submitted, the foreign-funded financial institution shall not transfer or sell their assets unless approved by the local branch office of the People's Bank of China at the place where it is located.

Article 100: If the liquidation process resulting from dissolution or closure involves matters relating to the examination and approval or verification and approval of foreign exchange, such matters shall be approved by the State Administration of Foreign Exchange and its local branches.

Article 101: The liquidation committee shall report on the development of debt repayment, assets disposal, loan settlement and account cancellation to the local branch office of the People's Bank of China at the place where it is located within the first 10 days of each month.

Article 102: After the institution to be liquidated has fully repaid all debts, its liquidation committee may apply to withdraw the interest-earning assets held in the form of term deposit by providing the following information to the relevant local branch office of the People's Bank of China for examination and approval:

1. letter of application signed by the chairman of the liquidation committee;

2. the liquidation report; and

3. other materials required for submission by the People's Bank of China.

Article 103: After completion of the liquidation process, the liquidation committee shall prepare a liquidation report to be submitted to the local branch office of the People's Bank of China at the place where it is located for confirmation and also to the administration for industry and commerce to apply for the cancellation of its registration, and publish a public notice in national newspapers designated by the head office of the People's Bank of China and local newspapers designated by the local branch office of the People's Bank of China at the place where it is located. The liquidation committee shall submit the contents of the public notice in writing to the local branch office of the People's Bank of China at the place where it is located three days before the date of publication.

Article 104: Post-liquidation accounting records and business materials shall be handled in accordance with the relevant provisions.

Article 105: A foreign bank whose branch has been liquidated shall not be allowed to apply for the establishment of a business institution in the same city in China within two years from the date on which the liquidation of the branch was completed.

Article 106: In the event that a foreign bank applies for the closure of its branch in China and applies for the establishment of a representative office in the same city, the foreign bank shall submit the following materials to the local branch office of the People's Bank of China at the place where it is located. Upon examination and consent by the local branch office, the same application documents shall be forwarded, through progressive levels, to the head office of the People's Bank of China for examination and approval:

1. a letter of application signed by chairman of the board or president (chief executive officer or general manager) of the applicant;

2. a power of attorney for the authorization of the chief representative signed by the signatory authorized by the foreign bank;

3. the résumé of the proposed chief representative;

4. photocopies of the identification certificate and academic certificate of the proposed chief representative;

5. a statement confirming no record of misconduct signed by the proposed chief representative; and

6. any other document and information required to be provided by the People's Bank of China.

Article 107: If a foreign-funded financial institution is operating in violation of laws and regulations or its business is not properly managed, such that the financial order would be seriously harmed and the interests of the social public would be damaged if it is not shut down, the People's Bank of China shall shut it down in accordance with the Rules on the Shutting Down of Financial Institutions Regulations.

The closure of a foreign bank branch at the order of the People's Bank of China shall be handled in accordance with the relevant provisions of the PRC, Company Law.

Article 108: In the event that liquidation is conducted as a result of the dissolution of any foreign-funded legal person institution and that the liquidation committee, having cleared the assets, prepared the balance sheet and the list of assets, discovers that the assets of the foreign-funded legal person institution are insufficient to repay its debts, it may, upon obtaining the approval of the People's Bank of China, immediately apply with the people's court to declare the institution bankrupt. Once the foreign-funded legal person institution is declared bankrupt by the people's court, the liquidation committee shall hand over the liquidation matters to the people's court.

Article 109: A foreign-funded financial institution that applies to resume its business in accordance with Article 39 of the Regulations shall submit the following materials to the local branch office of the People's Bank of China at the place where it is located. Upon examination and consent by the local branch office, the application shall be forwarded through progressive levels to the head office of the People's Bank of China for examination and approval:

1. a letter of application signed by the chairman of the board or president (chief executive officer or general manager) of the applicant;

2. board resolution; and

3. other materials required for submission by the People's Bank of China.

PART SEVEN: SUPPLEMENTARY PROVISIONS

Article 110: The People's Bank of China shall refer to the provisions on the administration of foreign bank branches in regulating branches of wholly foreign-owned banks and joint venture banks in China.

Article 111: The administrative procedures for a network of foreign-funded financial institutions in the same city shall be formulated separately by the People's Bank of China.

Article 112: Any foreign-funded financial institution that violates these Rules shall be penalized by the People's Bank of China in accordance with the Regulations and any other relevant provisions.

Article 113: These Rules shall become effective as of February 1 2002. The PRC Administration of Foreign-funded Financial Institutions Regulations Implementing Rules promulgated on April 30 1996, the Establishment of Branches by Banks with Foreign Capital in China Tentative Procedures promulgated on January 4 1996, the Shanghai Pudong New Area, Administration of Pilot Operation of renminbi Business by Foreign Investment Financial Institutions Tentative Procedures promulgated on December 2 1996, the Administration of the Qualifications for Middle and Senior Management Personnel of Foreign-funded Financial Institutions Tentative Provisions promulgated on May 15 1997, and the Closure by Foreign Banks of Their Business Branches in China Operational Guidelines promulgated on April 21 1999 by the People's Bank of China shall be repealed on the same date.

Endnote:

1 Translation provided by Clifford Chance.