PRC Regulations for the Administration of Foreign-invested Banks

Revised on November 27 2014. Latest revision can be found at: http://www.chinalawandpractice.com/Article/3424565/PRC-Regulations-for-the-Administration-of-Foreign-invested-Banks-2nd-Revision.html

(Promulgated by the State Council on November 11 2006 and effective as of December 11 2006.)

Order of the State Council No.478

PART ONE: GENERAL PROVISIONS

Article 1: These Regulations have been formulated in order to satisfy the requirements of opening to foreign investment and economic development, strengthen and improve the regulation of foreign-invested banks and promote the stable operation of the banking sector.

Article 2: For the purposes of these Regulations, the term "foreign-invested bank" means any of the institutions set forth below whose establishment in the People's Republic of China has been approved pursuant to relevant laws and regulations of the People's Republic of China:

(1) a wholly foreign-owned bank invested in and established solely by one foreign bank or one invested in and established by a foreign bank together with (an)other foreign financial institution(s);

(2) a Sino-foreign equity joint venture bank invested in and established by a foreign financial institution together with a Chinese company or enterprise;

(3) a foreign bank's branch; or

(4) a representative office of a foreign bank.

The institutions specified in Items (1) to (3) above are hereinafter collectively referred to as "Foreign-invested Banking Institutions of a Business Nature".

Article 3: For the purposes of these Regulations, the term "foreign financial institution" means a financial institution registered outside the People's Republic of China and approved or licensed by the financial regulator of the country or region where it is located.

For the purposes of these Regulations, the term "foreign bank" means a commercial bank registered outside the People's Republic of China and approved or licensed by the financial regulator of the country or region where it is located.

Article 4: Foreign-invested banks must comply with the laws and regulations of the People's Republic of China, and may not harm the national interest of the People's Republic of China or the public interest.

The legitimate activities and lawful rights and interests of foreign-invested banks shall be afforded the protection of the laws of the People's Republic of China.

Article 5: The State Council's banking regulatory authority and its agencies (hereinafter collectively referred to as the "Banking Regulatory Authority") are responsible for the regulation of foreign-invested banks and their activities. If laws or administrative regulations provide that another regulatory department or authority is to regulate foreign-invested banks and their activities, such provisions shall prevail.

Article 6: The State Council's banking regulatory authority shall formulate relevant incentive and guidance measures in line with the state's regional economic development strategy and relevant policies and implement the same after the approval of the State Council.

PART TWO: ESTABLISHMENT AND REGISTRATION

Article 7: The establishment of foreign-invested banks and their (sub-)branches shall be subject to the examination and approval of the Banking Regulatory Authorities.

Article 8: The minimum registered capital of a wholly foreign-owned bank or Sino-foreign equity joint venture bank shall be Rmb1 billion or the equivalent in a freely convertible currency. The registered capital shall be paid-in capital.

When a wholly foreign-owned bank or Sino-foreign equity joint venture bank establishes a branch in the People's Republic of China, its head office shall allocate it without consideration not less than Rmb100 million or the equivalent in a freely convertible currency as operating capital. The total of the operating capital allocated to its (sub-)branches by a wholly foreign-owned bank or Sino-foreign equity joint venture bank may not exceed 60% of the total capital of the head office.

The head office of a foreign bank's branch shall allocate it without consideration not less than Rmb200 million or the equivalent in a freely convertible currency as operating capital.

The State Council's banking regulatory authority may, in line with the scope of business of a Foreign-invested Banking Institution of a Business Nature and prudential regulation requirements, increase the minimum registered capital or operating capital and specify the renminbi share thereof.

Article 9: The shareholders of a proposed wholly foreign-owned bank or Sino-foreign equity joint venture bank or a foreign bank intending to establish a branch or representative office shall satisfy the following conditions:

(1) have sustained profitability, a good credit rating and no record of major violations of laws or regulations;

(2) the shareholder(s) of a proposed wholly foreign-owned bank, the foreign shareholder(s) of a proposed Sino-foreign equity joint venture bank or a foreign bank intending to establish a branch or representative office shall have experience in international financial activities;

(3) have an effective anti-money laundering system;

(4) the shareholder(s) of a proposed wholly foreign-owned bank, the foreign shareholder of a proposed Sino-foreign equity joint venture bank or a foreign bank intending to establish a branch or representative office shall be subject to effective regulation by, and its application shall have been approved by, the financial regulator of the country or region where it is located; and

(5) other prudential conditions specified by the State Council's banking regulatory authority.

The country or region where the shareholder(s) of a proposed wholly foreign-owned bank, the foreign shareholder(s) of a proposed Sino-foreign equity joint venture bank or the foreign bank intending to establish a branch or representative office is located shall have a sound financial regulatory system and its financial regulator shall have established a good regulatory cooperation mechanism with the State Council's banking regulatory authority.

Article 10: The shareholder(s) of a proposed wholly foreign-owned bank shall be (a) financial institution(s) and, in addition to satisfying the conditions of Article 9 hereof, the sole or controlling shareholder shall satisfy the following conditions:

(1) be a commercial bank;

(2) have established a representative office in the People's Republic of China for at least two years;

(3) have total assets of not less than US$10 billion as at the end of the year prior to submission of its establishment application; and

(4) have a capital adequacy ratio that complies with the provisions of the financial regulator of the country or region where it is located and those of the State Council's banking regulatory authority.

Article 11: The shareholders of a proposed Sino-foreign equity joint venture bank shall satisfy the conditions specified in Article 9 hereof, additionally, the foreign shareholder(s) and the sole or major Chinese shareholder shall be financial institutions, and the sole or major foreign shareholder shall additionally satisfy the following conditions:

(1) be a commercial bank;

(2) have established a representative office in the People's Republic of China;

(3) have total assets of not less than US$10 billion as at the end of the year prior to submission of the establishment application; and

(4) have a capital adequacy ratio that complies with the provisions of the financial regulator of the country or region where it is located and those of the State Council's banking regulatory authority.

Article 12: A foreign bank intending to establish a branch shall, in addition to satisfying the conditions specified in Article 9 hereof, satisfy the following conditions:

(1) have total assets of not less than US$20 billion as at the end of the year prior to submission of the establishment application;

(2) have a capital adequacy ratio that complies with the provisions of the financial regulator of the country or region where it is located and those of the State Council's banking regulatory authority; and

(3) if it is establishing a branch for the first time, having established a representative office in the People's Republic of China for at least two years.

Article 13: If a foreign bank establishes an institution of a business nature in the People's Republic of China, it may not establish representative offices additional to those it has already established, except in regions where doing so complies with state regional economic development strategies and related policies.

Where approval is granted for the conversion of a representative office into an institution of a business nature, the procedures for the de-registration of the representative office shall be carried out in accordance with the law.

Article 14: When establishing a Foreign-invested Banking Institution of a Business Nature, an application for preparation of establishment shall first be made and the application materials set forth below shall be submitted to the Banking Regulatory Authority of the place where the institution is to be established:

(1) a written application, which specifies the name, location and registered capital or operating capital of the proposed institution, the type of business applied for and others;

(2) a feasibility study;

(3) a draft of the articles of association, in the case of a proposed wholly foreign-owned bank or Sino-foreign equity joint venture bank;

(4) the operating contract executed by the shareholders, in the case of a proposed wholly foreign-owned bank or Sino-foreign equity joint venture bank;

(5) the articles of association of the shareholders of the proposed wholly foreign-owned bank or Sino-foreign equity joint venture bank or of the foreign bank intending to establish a branch;

(6) the organizational chart(s), list(s) of major shareholders and list(s) of overseas (sub-)branches and affiliates of the shareholders of the proposed wholly foreign-owned bank or Sino-foreign equity joint venture bank, or of the foreign bank intending to establish a branch and of the group of which it is a member;

(7) the annual reports for the most recent three years of the shareholders of the proposed wholly foreign-owned bank or Sino-foreign equity joint venture bank, or of the foreign bank intending to establish a branch;

(8) the anti-money laundering systems of the shareholders of the proposed wholly foreign-owned bank or Sino-foreign equity joint venture bank, or of the foreign bank intending to establish a branch;

(9) a photocopy of the business licence(s) or document granting permission to engage in the finance business issued by the financial regulator of the country or region where the shareholder(s) of the proposed wholly foreign-owned bank, the foreign shareholder(s) of the proposed Sino-foreign equity joint venture bank, or the foreign bank intending to establish a branch is/are located and such authority's opinion on the shareholder's/shareholders' or foreign bank's application; and

(10) other materials specified by the State Council's banking regulatory authority.

The Banking Regulatory Authority of the place where the institution is to be established shall forward the application materials together with its review opinion to the State Council's banking regulatory authority in a timely manner.

Article 15: The State Council's banking regulatory authority shall render its decision on whether or not to grant its approval for the preparation for establishment and notify the applicant in writing within six months from the date of receipt of the complete set of application materials for the establishment of a Foreign-invested Banking Institution of a Business Nature. If it decides to withhold its approval, it shall explain its reasons therefor.

If, in special circumstances, the State Council's banking regulatory authority is unable to complete its examination and render its decision on whether or not to grant approval for preparation for establishment by the deadline specified in the preceding paragraph, it may appropriately extend the examination period and notify the applicant thereof. However, such extension may not exceed three months.

The applicant shall, on the strength of the document approving the preparation for establishment, collect its application for commencement of business from the Banking Regulatory Authority of the place where the institution is to be established.

Article 16: The applicant shall complete its preparatory work within six months from the date on which it received the approval to prepare for establishment. If it fails to complete such work by the specified deadline, it shall explain the reasons therefor and, subject to the approval of the Banking Regulatory Authority of the place where the institution is to be established, its preparatory period may be extended for three months. If it still fails to complete the preparatory work within the extended period, the decision of the State Council's banking regulatory authority approving the preparation for establishment shall automatically become null and void.

Article 17: Once the preparatory work has been completed and accepted, the applicant shall submit the duly completed application for commencement of business together with the following materials to the Banking Regulatory Authority of the place where the institution is to be established:

(1) the list of the main persons in charge of the proposed institution and their r¨¦sum¨¦s;

(2) the power of attorney of the proposed institution's main persons in charge;

(3) the capital verification certificate issued by an official capital verification institution;

(4) information on security measures and on other facilities relating to the business;

(5) a guarantee under which the foreign bank establishing a branch undertakes to bear liability for taxes and debts; and

(6) other materials specified by the State Council's banking regulatory authority.

The Banking Regulatory Authority of the place where the institution is to be established shall forward the application materials together with its review opinion to the State Council's banking regulatory authority in a timely manner.

Article 18: The State Council's banking regulatory authority shall render its decision on whether or not to grant its approval for the commencement of business and notify the applicant in writing within two months from the date of receipt of the complete set of application materials for the commencement of business. If it decides to grant approval, it shall issue a finance permit. If it decides to withhold its approval, it shall explain its reasons therefor.

Article 19: A Foreign-invested Banking Institution of a Business Nature whose establishment has been approved shall, on the strength of its finance permit, carry out registration procedures with, and collect its business licence from, the administration for industry and commerce.

Article 20: When establishing a representative office of a foreign bank, the following materials shall be submitted to the Banking Regulatory Authority of the place where the representative office is to be established:

(1) an application specifying the name, location, etc., of the proposed representative office;

(2) a feasibility study;

(3) the articles of association of the applicant;

(4) the organizational chart, list of major shareholders and list of overseas branches and affiliates of the applicant and of the group of which it is a member;

(5) the applicant's annual reports for the most recent three years;

(6) the applicant's anti-money laundering system;

(7) photocopies of the proof of identity and academic qualifications of the proposed chief representative of the representative office, his/her r¨¦sum¨¦ and a statement as to whether he/she has a record of improper conduct;

(8) the power of attorney of the proposed chief representative of the representative office;

(9) a photocopy of the business licence or document granting permission to engage in the finance business issued by the financial regulator of the country or region where the applicant is located and such authority's opinion on the applicant's application; and

(10) other materials specified by the State Council's banking regulatory authority.

The Banking Regulatory Authority of the place where the representative office is to be established shall forward the application materials together with its review opinion to the State Council's banking regulatory authority in a timely manner.

Article 21: The State Council's banking regulatory authority shall render its decision on whether or not to grant its approval for establishment and notify the applicant in writing within six months from the date of receipt of the complete set of application materials for the establishment of a representative office of a foreign bank. If it decides to withhold its approval, it shall explain the reasons therefor.

Article 22: A foreign bank's representative office whose establishment has been approved shall, on the strength of its approval document, carry out registration procedures with, and collect its business licence from, the administration for industry and commerce.

Article 23: If the materials specified in Article 14, 17 or 20 hereof, with the exception of the annual reports, are written in a foreign language, they shall be accompanied with a Chinese translation.

Article 24: In line with the principles of lawfulness, prudence and ongoing operations and with the approval of the State Council's banking regulatory authority, a foreign bank may convert a branch established in the People's Republic of China into a wholly foreign-owned bank in which it is the sole investor. The applicant shall submit its application for the establishment of a wholly foreign-owned bank in accordance with the examination and approval conditions, procedure and application materials specified by the State Council's banking regulatory authority.

Article 25: If a foreign bank's branches are converted into a wholly foreign-owned bank in which the head office is the sole investor, subject to the approval of the State Council's banking regulatory authority, the foreign bank may retain for a specified period of time one branch that engages in foreign exchange wholesale business. The applicant shall submit its application in accordance with the examination and approval conditions, procedure and application materials specified by the State Council's banking regulatory authority.

For the purposes of the preceding paragraph, the term "foreign exchange wholesale business" means foreign exchange business with customers other than individuals.

Article 26: The qualifications of the directors, senior management personnel and chief representatives of foreign-invested banks shall satisfy the conditions specified by, and be subject to the approval of, the State Council's banking regulatory authority.

Article 27: If a foreign-invested bank encounters any of the following circumstances, it shall require the approval of the State Council's banking regulatory authority, submit application materials in accordance with provisions and carry out the relevant registration procedures with the administration for industry and commerce in accordance with the law:

(1) it makes a change to its registered capital or operating capital;

(2) it changes its name, place of business or office premises;

(3) it revises its scope of business;

(4) it experiences a change in shareholders or an adjustment is made in the shareholding percentages of its shareholders;

(5) it amends its articles of association; or

(6) another circumstance specified by the State Council's banking regulatory authority arises.

If a foreign-invested bank is to replace a director, a member of its senior management personnel or its chief representative, it shall report the same to the State Council's banking regulatory authority for approval of the qualifications of the replacement for the position.

Article 28: If a change in the shareholders of a wholly foreign-owned bank or Sino-foreign equity joint venture bank is to be made, the shareholders, following such change, shall satisfy the conditions for shareholders specified in Article 9, 10 or 11 hereof.

Under special circumstances and with the consent of the State Council's banking regulatory authority, the shareholders, following the change, may be exempted from compliance with Item (2) of Article 10 or Item (2) of Article 11 hereof.

PART THREE: SCOPE OF BUSINESS

Article 29: Based on the scope of business approved by the State Council's banking regulatory authority, wholly foreign-owned banks and Sino-foreign equity joint venture banks may engage in some or all of the following foreign exchange and renminbi business:

(1) taking deposits from the public;

(2) extension of short-term, medium-term and long-term loans;

(3) handling acceptance and discounting of bills;

(4) dealing in government bonds and financial bonds, and dealing in other negotiable securities, other than stocks, denominated in foreign currencies;

(5) providing letter of credit services and security;

(6) handling of domestic and foreign settlements;

(7) dealing in foreign exchange and dealing in foreign exchange as an agency;

(8) insurance agency;

(9) engaging in interbank lending;

(10) engaging in bank card business;

(11) providing safety deposit box service;

(12) providing credit investigation and consulting services;
and

(13) other business approved by the State Council's banking regulatory authority.

Subject to the approval of the People's Bank of China, wholly foreign-owned banks and Sino-foreign equity joint venture banks may engage in foreign exchange settlement and foreign exchange sales business.

Article 30: The (sub-)branches of wholly foreign-owned banks and Sino-foreign equity joint venture banks shall engage in business within the scope authorized by their head offices, and their civil liability shall be borne by their head offices.

Article 31: Based on the scope of business approved by the State Council's banking regulatory authority, foreign banks' branches may engage in some or all of the following foreign exchange business as well as renminbi business targeting customers other than citizens in China:

(1) taking deposits from the public;

(2) extension of short-term, medium-term and long-term loans;

(3) handling acceptance and discounting of bills;

(4) dealing in government bonds and financial bonds, and dealing in other negotiable securities, other than stocks, denominated in foreign currencies;

(5) providing letter of credit services and security;

(6) handling domestic and foreign settlements;

(7) dealing in foreign exchange and dealing in foreign exchange as an agency;

(8) insurance agency;

(9) engaging in interbank lending;

(10) providing safety deposit box service;

(11) providing credit investigation and consulting services; and

(12) other business approved by the State Council's banking regulatory authority.

Branches of foreign banks may attract term deposits of not less than Rmb1 million each from citizens in China.

Subject to the approval of the People's Bank of China, foreign banks' branches may engage in foreign exchange settlement and foreign exchange sales business.

Article 32: The civil liability of a foreign bank's branch and that of its sub-branches and offices shall be borne by the head office.

Article 33: The representative office of a foreign bank may engage in such non-business type activities relating to the business of the foreign bank that it represents as liaison, market surveying, consulting services and others.

The civil liability arising from the acts of a representative office of a foreign bank shall be borne by the foreign bank that it represents.

Article 34: A Foreign-invested Banking Institution of a Business Nature that engages in renminbi business within the scope of business specified in Article 29 or 31 hereof shall satisfy the following conditions and be subject to the approval of the State Council's banking regulatory authority:

(1) having been in business in the People's Republic of China for three years or more prior to the submission of its application;

(2) having been profitable for two years in succession prior to the submission of its application; and

(3) other prudential conditions specified by the State Council's banking regulatory authority.

If a foreign bank's branch is converted into a wholly foreign-owned bank in which its head office is the sole investor, the time periods specified in Items (1) and (2) of the preceding paragraph shall be calculated from the date on which the foreign bank's branch was established.

PART FOUR: REGULATION

Article 35: A Foreign-invested Banking Institution of a Business Nature shall formulate its business rules and establish and improve its risk management and internal control systems in accordance with relevant provisions, and act in accordance therewith.

Article 36: A Foreign-invested Banking Institution of a Business Nature shall comply with the state's uniform accounting system and relevant information disclosure provisions of the State Council's banking regulatory authority.

Article 37: When taking out foreign debt, a Foreign-invested Banking Institution of a Business Nature shall handle matters in accordance with relevant state provisions.

Article 38: A Foreign-invested Banking Institution of a Business Nature shall determine deposit and loan interest rates and the rates for various service charges in accordance with relevant provisions.

Article 39: A Foreign-invested Banking Institution of a Business Nature that engages in deposit business shall deposit a deposit reserve in accordance with the provisions of the People's Bank of China.

Article 40: Wholly foreign-owned banks and Sino-foreign equity joint venture banks shall comply with the provisions of the PRC Commercial Banking Law on the administration of asset-liability ratios. If the asset-liability ratio of a wholly foreign-owned bank converted from a foreign bank's branch in which its head office is the sole investor or of a wholly foreign-owned bank or Sino-foreign equity joint venture bank established prior to the implementation hereof is not compliant, it shall satisfy such requirements within the time period specified by the State Council's banking regulatory authority.

The State Council's banking regulatory authority may require a wholly foreign-owned bank or Sino-foreign equity joint venture bank with relatively elevated risks or whose risk management capabilities are relatively weak to increase its capital adequacy ratio.

Article 41: A Foreign-invested Banking Institution of a Business Nature shall make provisions for bad debts in accordance with provisions.

Article 42: Wholly foreign-owned banks and Sino-foreign equity joint venture banks shall comply with relevant provisions of the State Council's banking regulatory authority on corporate governance.

Article 43: Wholly foreign-owned banks and Sino-foreign equity joint venture banks shall comply with relevant provisions of the State Council's banking regulatory authority on affiliated transactions.

Article 44: Thirty percent of the operating capital of a foreign bank's branch shall exist in the form of interest-bearing assets designated by the State Council's banking regulatory authority.

Article 45: The percentage of the renminbi share of the total of a branch of a foreign bank's operating capital plus reserves, etc., to its renminbi risk assets may not be less than 8%.

The State Council's banking regulatory authority may require a foreign bank's branch with relatively elevated risks or whose risk management capabilities are relatively weak to increase the percentage specified in the preceding paragraph.

Article 46: A foreign bank's branch shall ensure the liquidity of its assets. The percentage of the balance of current assets to the balance of current liabilities may not be less than 25%.

Article 47: The balance of renminbi and foreign currency assets in China of a foreign bank's branch may not be less than the balance of its renminbi and foreign currency liabilities in China.

Article 48: If a foreign bank establishes two or more branches in the People's Republic of China, it shall authorize one among them to exercise centralized management over the others.

The State Council's banking regulatory authority shall effect consolidated regulation of the branches established in the People's Republic of China by a foreign bank.

Article 49: A Foreign-invested Banking Institution of a Business Nature shall report large cross-border fund flows and asset transfers to the Banking Regulatory Authority of the place where it is located in accordance with the relevant provisions of the State Council's banking regulatory authority.

Article 50: Depending on the risk status of a Foreign-invested Banking Institution of a Business Nature, the State Council's banking regulatory authority may, in accordance with the law, take such special regulatory measures against it as ordering it to suspend some of its business, ordering it to replace senior management personnel, etc.

Article 51: A Foreign-invested Banking Institution of a Business Nature shall engage an accounting firm lawfully established in the People's Republic of China to audit its financial accounting reports and shall report such engagement to the Banking Regulatory Authority of the place where it is located. If it dismisses its accounting firm, it shall explain the reason therefor.

Article 52: A Foreign-invested Banking Institution of a Business Nature shall submit its financial accounting reports, statements and relevant information to the Banking Regulatory Authority in accordance with provisions.

The representative office of a foreign bank shall submit information to the Banking Regulatory Authority in accordance with provisions.

Article 53: A foreign-invested bank shall submit itself to the monitoring inspections conducted by the Banking Regulatory Authority in accordance with the law, and may not refuse or interfere with such inspections.

Article 54: Wholly foreign-owned banks and Sino-foreign equity joint venture banks shall establish independent internal control systems, risk management systems, financial accounting systems and computer information management systems.

Article 55: The chairman of the board of directors and senior management personnel of a wholly foreign-owned bank established in the People's Republic of China by a foreign bank may not serve concurrently as senior management personnel of the foreign bank's branch that engages in foreign exchange wholesale business, or vice versa.

Article 56: The transactions conducted between a wholly foreign-owned bank established in the People's Republic of China by a foreign bank and such bank's branch that engages in foreign exchange wholesale business shall comply with commercial principles and the transaction terms may not be more favourable than the terms of transactions conducted with non-affiliated parties. A foreign bank shall provide security for the whole amount of a fund transaction conducted between its wholly foreign-owned bank established in the People's Republic of China and its branch that engages in foreign exchange wholesale business.

Article 57: A foreign bank's representative office and its working personnel may not engage in activities of a business nature in any form.

PART FIVE: TERMINATION AND LIQUIDATION OF BUSINESS

Article 58: If a Foreign-invested Banking Institution of a Business Nature is to terminate its business activities of its own accord, it shall submit a written application to the State Council's banking regulatory authority 30 days prior to the termination of its business activities. After examination and approval, it shall be dissolved or closed down and liquidated.

Article 59: If a Foreign-invested Banking Institution of a Business Nature becomes insolvent, the State Council's banking regulatory authority may order it to suspend operations and reorganize within a specified period of time. If it recovers solvency during the reorganization period and wishes to recommence operations, it shall submit an application for the recommencement of operations to the State Council's banking regulatory authority. If it fails to restore its solvency during the reorganization period, it shall be liquidated.

Article 60: If a Foreign-invested Banking Institution of a Business Nature is terminated as a result of being dissolved, closing down, being closed down in accordance with the law or being declared bankrupt, specific matters relating to its liquidation shall be handled in accordance with relevant laws and regulations of the People's Republic of China.

Article 61: Once the liquidation of a Foreign-invested Banking Institution of a Business Nature is concluded, de-registration procedures shall be carried out by the statutory deadline with the original registration authority.

Article 62: If a representative office of a foreign bank is to terminate its activities of its own accord, it shall require the approval of the State Council's banking regulatory authority for closing down and carry out de-registration procedures by the statutory deadline with the original registration authority.

PART SIX: LEGAL LIABILITY

Article 63: If a foreign-invested bank is established without the examination and approval of the State Council's banking regulatory authority or if business activities of a banking type financial institution are engaged in illegally, the State Council's banking regulatory authority shall close down such operations and the State Council's banking regulatory authority will not accept applications for the establishment of a foreign-invested bank from the concerned party or parties for a period of five years from the date of closing down. If a criminal offence is established, criminal liability shall be pursued in accordance with the law. If a criminal offence is not established, the State Council's banking regulatory authority shall confiscate the illegal income and, if the illegal income totals Rmb500,000 or more, impose a fine of not less than the amount of the illegal income and not more than five times the amount, or, if there is no illegal income or if it is less than Rmb500,000, a fine of not less than Rmb500,000 and not more than Rmb2 million.

Article 64: If a Foreign-invested Banking Institution of a Business Nature encounters any of the circumstances set forth below, the State Council's banking regulatory authority shall order it to rectify the matter, confiscate its illegal income and, if the illegal income totals Rmb500,000 or more, impose a fine of not less than the amount of the illegal income and not more than five times the amount, or, if there is no illegal income or if it is less than Rmb500,000, a fine of not less than Rmb500,000 and not more than Rmb2 million; if the circumstances are particularly serious or if it fails to rectify the matter within the specified period of time, the State Council's banking regulatory authority may order it to suspend operations and undergo rectification or revoke its finance permit; if a criminal offence is established, criminal liability shall be pursued in accordance with the law:

(1) it establishes a (sub-)branch without approval;

(2) it effects a change or terminates business without approval;

(3) it violates provisions by engaging in business activities for which it has not received approval; or

(4) it violates provisions by increasing or reducing the deposit or loan interest rate.

Article 65: If a foreign-invested bank encounters any of the circumstances set forth below, the State Council's banking regulatory authority shall order it to rectify the matter and impose a fine of not less than Rmb200,000 and not more than Rmb500,000; if the circumstances are particularly serious or if it fails to rectify the matter within the specified period of time, the State Council's banking regulatory authority may order it to suspend operations and undergo rectification, revoke its finance permit or close down the representative office; if a criminal offence is established, criminal liability shall be pursued in accordance with the law:

(1) it fails to disclose information in accordance with relevant provisions;

(2) it refuses or interferes with a monitoring inspection conducted by the Banking Regulatory Authority in accordance with the law;

(3) it provides false financial accounting reports, statements or relevant information or those that conceal material facts;

(4) it conceals or destroys documents, certificates, account books, electronic data or other information required for a monitoring inspection;

(5) it appoints a director, member of its senior management personnel or a chief representative whose qualifications have not been approved; or

(6) it refuses to implement the special regulatory measures specified in Article 50 hereof.

Article 66: If a Foreign-invested Banking Institution of a Business Nature violates relevant provisions hereof by failing to submit financial accounting reports, statements and relevant information on time, or fails to formulate relevant business rules or establish sound management systems in accordance with provisions, the State Council's banking regulatory authority shall order it to rectify the matter within a specified period of time. If it fails to rectify the matter within the specified period of time, the State Council's banking regulatory authority shall impose a fine of not less than Rmb100,000 and not more than Rmb300,000.

Article 67: If a Foreign-invested Banking Institution of a Business Nature violates Part Four hereof in conducting its business or seriously violates other prudential operating rules, the State Council's banking regulatory authority shall order it to rectify the matter and impose a fine of not less than Rmb200,000 and not more than Rmb500,000. If the circumstances are particularly serious or if it fails to rectify the matter within the specified period of time, the State Council's banking regulatory authority may order it to suspend operations and undergo rectification or revoke its finance permit.

Article 68: If a Foreign-invested Banking Institution of a Business Nature violates these Regulations, the State Council's banking regulatory authority, in addition to imposing penalties in accordance with Articles 63 to 67 hereof, may, depending on the circumstances, take the following measures:

(1) order the Foreign-invested Banking Institution of a Business Nature to replace the directors and senior management personnel directly in charge and other persons directly responsible;

(2) if the act committed by the Foreign-invested Banking Institution of a Business Nature does not constitute a criminal offence, give a warning to, and impose a fine of not less than Rmb50,000 and not more than Rmb500,000 on, the directors and senior management personnel directly in charge and other persons directly responsible;

(3) revoke the qualifications in the People's Republic of China of the directors and senior management personnel directly in charge and other persons directly responsible for a certain period of time up to a lifetime ban or prohibit the directors and senior management personnel directly in charge and other persons directly responsible from working in the banking sector in the People's Republic of China for a certain period of time up to a lifetime ban.

Article 69: If a representative office of a foreign bank violates these Regulations by engaging in activities of a business nature, the State Council's banking regulatory authority shall order it to rectify the matter, give it a warning, confiscate its illegal income and, if the illegal income totals Rmb500,000 or more, impose a fine of not less than the amount of the illegal income and not more than five times the amount, or, if there is no illegal income or if it is less than Rmb500,000, a fine of not less than Rmb500,000 and not more than Rmb2 million. If the circumstances are serious, the State Council's banking regulatory authority shall close down the representative office. If a criminal offence is established, criminal liability shall be pursued in accordance with the law.

Article 70: If a representative office of a foreign bank encounters any of the circumstances set forth below, the State Council's banking regulatory authority shall order it to rectify the matter, give it a warning and impose a fine of not less than Rmb100,000 and not more than Rmb300,000; if the circumstances are serious, the State Council's banking regulatory authority shall revoke the qualifications in the People's Republic of China of the chief representative for a certain period of time or require the foreign bank that he/she represents to replace him/her; if the circumstances are particularly serious, the State Council's banking regulatory authority shall close it down:

(1) it changes office premises without approval;

(2) it fails to submit information to the State Council's banking regulatory authority in accordance with provisions; or

(3) it violates other provisions hereof or of other provisions of the State Council's banking regulatory authority.

Article 71: If a foreign-invested bank violates other laws or regulations of the People's Republic of China, the matter shall be handled by the relevant competent authority in accordance with the law.

PART SEVEN: SUPPLEMENTARY PROVISIONS

Article 72: These Regulations shall apply mutatis mutandis to the establishment of banking institutions in the mainland by financial institutions of the Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan. If the State Council has provided otherwise, such provisions shall govern.

Article 73: These Regulations shall be effective as of December 11 2006. The PRC Regulations for the Administration of Foreign-invested Financial Institutions promulgated by the State Council on December 20 2001 shall be repealed simultaneously.