China Banking Regulatory Commission, Guidelines on Financial Innovation of Commercial Banks

Promulgated: December 6 2006
Effective: December 11 2006
Interpreting authority: China Banking Regulatory Commission (CBRC)
Applicability: These Guidelines apply to Chinese-invested commercial banks, wholly foreign-owned banks and Sino-foreign equity joint venture banks established in the PRC.
Financial innovation launched by policy banks, rural cooperative banks, urban credit cooperatives, rural credit cooperatives, branches of foreign banks established in the PRC shall, mutatis mutandis, be handled in accordance with these Guidelines. Financial innovation launched by non-bank financial institutions regulated by the CBRC such as financial asset management companies, trust and investment corporations, lease-financing companies, finance companies of enterprise groups, auto finance companies and money brokers established in the PRC shall, mutatis mutandis, be handled in accordance with these Guidelines (Article 2).
The term "financial innovation" refers to all types of new activities that are launched, in order to meet the requirements of economic development, by commercial banks in areas such as strategic decision-making, system arrangement, setting up internal bodies, human resources, management model, business flow and financial products through the introduction of new techniques, the adoption of new methods, the opening up of new markets and the establishment of new organizations, and that eventually bring about continuous improvement in the risk management capabilities of banks as well as the creation of and updates in the service products and service modes provided to customers (Article 3).

Main contents: According to the Guidelines, the CBRC will actively create a system and a legal environment that is favourable to financial innovation (Article 8). To launch financial innovation activities, commercial banks shall disclose information to customers in an accurate, equitable and non-misleading manner (Article 28), and establish effective channels for handling customers' complaints and suggestions (Article 34). Commercial banks shall centralize the management of risks attached to financial innovation activities and those attached to other traditional businesses (Article 35).
Related legislation: PRC Banking Regulation Law, Dec 27 2003, CLP 2004 No.1 p.45 and PRC Commercial Banking Law (Revised), Dec 27 2003, CLP 2004 No.1 p.4