Implementing Rules for the PRC Regulations for the Administration of Foreign-invested Banks

Article 2: For the purposes of the Regulations, the term "State Council's banking regulatory authority" means the China Banking Regulatory Commission (the CBRC), and the term "banking regulatory authorities" means the CBRC and its offices.

PART TWO: ESTABLISHMENT AND REGISTRATION

Article 3: For the purposes of the Regulations and these Rules, the term "prudential conditions" shall, at minimum, comprise the following:

(1) having a good industry reputation and public image;

(2) having good results as a going concern and good asset quality;

(3) management having good professional qualifications and management capabilities;

(4) having a sound risk management system that can effectively control the risks associated with affiliated transactions;

(5) having sound internal control systems and an effective information management system;

(6) preparing financial accounting reports based on prudent accounting principles, and the accounting firm issuing an unqualified opinion on the financial accounting reports for the three years preceding the application;

(7) having no record of a major violation of laws or regulations;

(8) having effective capital constraint and capital replenishment mechanisms; and

(9) having a sound corporate governance structure.

Items (8) and (9) of this Article shall apply to wholly foreign-owned banks and their shareholders, Sino-foreign equity joint venture banks and their shareholders, and foreign banks.

Article 4: For the purposes of Article 11 of the Regulations, the term "major shareholder" means a commercial bank that will hold at least 50% of the total capital or total shares of the proposed Sino-foreign equity joint venture bank or that, although it will not hold at least 50% of the total capital or total shares thereof, its relationship to the proposed Sino-foreign equity joint venture bank is characterized by any of the following circumstances:

(1) it will hold at least half of the voting rights in the proposed Sino-foreign equity joint venture bank;

(2) it will have the power to control the financial and operational policies of the proposed Sino-foreign equity joint venture bank;

(3) it will have the power to appoint and dismiss the majority of the members of the board of directors or similar authority body of the proposed Sino-foreign equity joint venture bank; or

(4) it will have at least 50% of the voting rights on the board of directors or similar authority body of the proposed Sino-foreign equity joint venture bank.

A major shareholder of a proposed Sino-foreign equity joint venture bank shall include the proposed Sino-foreign equity joint venture bank in its consolidated statements.

Article 5: An entity may not serve as a shareholder of a proposed wholly foreign-owned bank or proposed Sino-foreign equity joint venture bank if:

(1) its corporate governance structure and mechanisms have obvious flaws;

(2) its equity relationships are complex or lack in transparency;

(3) it has many affiliates, and affiliated transactions are frequent or anomalous;

(4) its core business is not salient or its scope of business involves an overly large number of industries; or

(5) it is characterized by another circumstance that would have a material adverse impact on the proposed bank.

Article 6: For the purposes of Articles 10 through 12 of the Regulations, the phrase "as at the end of the year prior to submission of the establishment application" means as at the end of the financial year preceding the date of the application. The phrase "having a capital adequacy ratio that complies with the provisions of the State Council's banking regulatory authority" means a capital adequacy ratio of not less than 8%.

Article 7: A feasibility study report as mentioned in Article 14 of the Regulations and Articles 15, 26 and 30 hereof shall include the applicant's basic particulars, an analysis of the market prospects of the proposed institution, the plan for the future business development of the proposed institution, the organizational and management structure of the proposed institution, the scale of the assets and liabilities and a forecast of the profitability of the proposed institution during the three years following the commencement of business, etc.

A feasibility study report as mentioned in Article 20 of the Regulations shall include the applicant's basic particulars and the purpose of, and plan for, the proposed representative office.

Article 8: The "name of the proposed institution" as mentioned in Item (1) of Article 14 and the "name of the proposed representative office" as mentioned in Item (1) of Article 20 of the Regulations shall include the name in Chinese and in a foreign language.

The Chinese name of a branch or representative office of a foreign bank shall indicate the nationality of the foreign bank and the form of liability.

Article 9: The photocopy of the business licence, photocopy of the document granting permission to engage in the finance business, power of attorney and guarantee under which a foreign bank undertakes to bear liability for the taxes and debts of its branches in China as mentioned in the Regulations and these Rules shall be notarized by the approved organization in the applicant's domicile country or region and authenticated by the Chinese embassy or consulate in such country.

As required by the circumstances, the CBRC may require that other application materials submitted by the applicant be notarized by the approved organization in the applicant's domicile country or region and authenticated by the Chinese embassy or consulate in such country.

Article 10: Annual reports as mentioned in the Regulations and these Rules shall be audited and accompanied by an audit opinion issued by an approved accounting firm in the applicant's domicile country or region. Annual reports printed in a language other than Chinese or English shall be accompanied by a Chinese or English translation.

Article 11: If the applicant is establishing a foreign-invested bank for the first time, it shall submit information on the finance system of its domicile country or region and a synopsis of relevant finance regulatory regulations.

If the applicant is establishing a representative office for the first time, it shall submit a proof issued by a financial institution in the banking sector registered in China of its establishment of an agency relationship with the foreign bank.

Article 12: When a foreign bank wishes to establish an additional branch in China, it shall satisfy the conditions specified in Articles 9 and 12 of the Regulations and additionally, its existing branch(es) in China shall satisfy the prudential conditions specified by the CBRC.

When a foreign bank wishes to establish an additional representative office in China, it shall satisfy the conditions specified in Article 9 of the Regulations and additionally, its existing branch(es) in China shall not have a record of any major violations of laws or regulations.

Article 13: A wholly foreign-owned bank or Sino-foreign equity joint venture bank that wishes to establish a branch shall satisfy the prudential conditions specified by the CBRC.

Article 14: For the purposes of Articles 14, 17 and 20 of the Regulations, the term "banking regulatory authority of the place where the institution is to be established" means the banking regulatory bureau of the place where the institution is to be established. The phrase "forward in a timely manner" means forwarding the application materials together with the review opinion to the CBRC within 20 days from the date of receipt of the complete set of application materials.

A copy of the application materials mentioned in Articles 14, 17 and 20 of the Regulations shall be sent to the CBRC office of the place where the proposed institution or representative office is to be established.

The written application mentioned in Articles 14 and 20 of the Regulations shall be addressed to the chairperson of the CBRC and jointly signed by the chairpersons of the board of directors or managers (or chief executive officers or general managers) of each party to the proposed wholly foreign-owned bank or Sino-foreign equity joint venture bank, or signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the foreign bank intending to establish a branch or representative office.

Article 15: When a wholly foreign-owned bank or Sino-foreign equity joint venture bank wishes to establish a branch, it shall first apply for preparation for establishment and submit the following materials (in duplicate) to the banking regulatory bureau of the place where its head office is located, with a copy to the banking regulatory bureau of the place where the branch is to be established:

(1) a written application addressed to the chairperson of the CBRC and signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the applicant, which shall specify the name, location and operating capital of the proposed branch, the type of business applied for, etc.

(2) a feasibility study report;

(3) the applicant's articles of association;

(4) the applicant's annual report;

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

(6) a photocopy of the applicant's business licence;

(7) the resolution of the board of directors consenting to the application to establish the branch; and

(8) other materials required by the CBRC.

The banking regulatory bureau of the place where the head office of the wholly foreign-owned bank or Sino-foreign equity joint venture bank is located shall forward the application materials together with its review opinion to the CBRC within 20 days from the date of receipt of the complete set of application materials.

The banking regulatory bureau of the place where the branch is to be established shall forward its review opinion to the CBRC within 20 days from the date of receipt of the application materials.

Article 16: When establishing a foreign-invested banking institution of a business nature, the applicant shall collect an application for commencement of business from the CBRC office of the place where the institution is to be established within 15 days from the date of receipt of the notice approving the preparation for establishment, and commence the preparatory work. The applicant shall establish a preparatory committee responsible for the preparatory work during the preparatory period and submit the name of the person in charge of the preparatory committee to the aforementioned CBRC office. The preparatory committee shall dissolve once the preparatory work is completed. The preparatory period shall be six months.

If the applicant fails to collect the application for the commencement of business during the specified period of time, the CBRC and its office will refuse to accept applications from the applicant for the establishment of an institution of a business nature in the same city in China for a period of one year from the date of approval of the preparation for establishment.

Article 17: When establishing a foreign-invested banking institution of a business nature, the applicant shall complete the following tasks during the preparatory period:

(1) establishing a sound corporate governance structure and submitting a description of the corporate governance structure to the CBRC office of the place where the institution is to be established (applicable only to wholly foreign-owned banks and Sino-foreign equity joint venture banks);

(2) establishing internal control systems, including the internal organizational structure, and the control systems and operating rules for authorizations and credit extension, credit facilities management, monetary transactions, accounting and the computer information management system, and submitting details of the internal control systems and operating rules to the CBRC office of the place where the institution is to be established;

(3) having an appropriate number of business personnel who meet business development requirements and have received relevant training on policies, regulations and vocational knowledge, etc. in order to satisfy requirements in respect of the effective monitoring of the principal business risks, the hierarchical examination, approval, and checking of business, and the division of work and checks and balances among key positions, etc.;

(4) printing of important business vouchers and receipts to be used externally and submitting specimens thereof to the CBRC office of the place where the institution is to be established;

(5) putting in place security facilities approved by the relevant departments and submitting photocopies of the relevant supporting documents to the CBRC office of the place where the institution is to be established; and

(6) engaging a qualified accounting firm lawfully established in China to conduct a pre-opening audit of the institution's internal control systems, accounting system, computer system, etc. and submitting the audit report to the CBRC office of the place where the institution is to be established.

Article 18: If an applicant wishes to apply for an extension of the preparatory period, it shall submit an application to the CBRC office of the place where the institution is to be established one month prior to the expiration of the preparatory period. The written application shall be signed by the person in charge of the preparatory committee of the proposed foreign-invested banking institution of a business nature.

The CBRC office of the place where the institution is to be established shall render its decision on whether or not to approve the extension of the preparatory period and notify the applicant in writing within 15 days from the date of receipt of the complete set of application materials for the extension of the preparatory period. Additionally, it shall forward a copy thereof by level to the CBRC. If it decides to withhold its approval, it shall explain the reason therefor.

If an applicant fails to submit its application for the extension of the preparatory period by the specified deadline, the CBRC office will refuse to accept the application.

Article 19: Once the preparatory tasks for the establishment of the proposed foreign-invested banking institution of a business nature are completed, the person in charge of the preparatory committee shall submit an application for a pre-opening acceptance check to the CBRC office of the place where the institution is to be established. The CBRC office shall conduct the acceptance check within 10 days. If the institution passes the acceptance check, it shall be issued an acceptance opinion. If it fails the acceptance check, the CBRC office shall notify the applicant in writing and the applicant may apply for a re-check with the CBRC office after 10 days from the date of receipt of the notice.

Article 20: Once the institution has passed the acceptance check and the preparatory work is completed, the applicant shall submit the acceptance opinion, the application for the commencement of business addressed to the chairperson of the CBRC and signed by the person in charge of the preparatory committee of the proposed foreign-invested banking institution of a business nature, together with the application materials specified in Article 17 of the Regulations (in duplicate), to the banking regulatory bureau of the place where the institution is to be established, with a copy to the CBRC office of the place where the institution is to be established.

The banking regulatory bureau of the place where the institution is to be established shall forward the application materials, the acceptance opinion together with its review opinion to the CBRC within 20 days from the date of receipt of the complete set of application materials for the commencement of business.

Article 21: Once a foreign-invested banking institution of a business nature has received approval to commence business, it shall collect its finance permit in accordance with relevant provisions.

Article 22: A foreign-invested banking institution of a business nature shall commence business within six months from the date of receipt of its business licence. Under special circumstances and with the approval of the CBRC office of the place where it is located, it may postpone commencement of its business.

If a foreign-invested banking institution of a business nature wishes to apply for a postponement of commencement of its business, it shall submit an application to the CBRC office of the place where it is located one month prior to the expiration of the period for the commencement of business. The written application shall be signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the wholly foreign-owned bank or Sino-foreign equity joint venture bank or the manager (or general manager) of the foreign bank's branch.

The CBRC office of the place where the foreign-invested banking institution of a business nature is located shall render its decision on whether or not to grant approval of the extension of the period for commencement of business and notify the applicant in writing within 15 days from the date of receipt of the complete set of application materials for the extension of the period for commencement of business. Additionally, it shall forward a copy thereof by level to the CBRC. If it decides to withhold its approval, it shall explain the reason therefor.

If a foreign-invested banking institution of a business nature fails to submit its application for the extension of the period for the commencement of business within the specified period, the CBRC office will refuse to accept its application.

The maximum extension of the period for commencement of business shall be three months. If a foreign-invested banking institution of a business nature fails to commence business by the expiration of the period for the commencement of business, its approval for the commencement of business shall automatically become null and void and it shall return its finance permit to the CBRC. The CBRC and its office will refuse to accept applications from the applicant for the establishment of an institution of a business nature in the same city in China for a period of one year from the date on which its approval to commence business became null and void.

Article 23: Before it commences business, the foreign-invested banking institution of a business nature shall report the date for the commencement of its business in writing to the CBRC office of the place where it is located. Before the foreign-invested banking institution of a business nature commences business, it shall publish an announcement in the national newspaper(s) designated by the CBRC and the local newspaper(s) designated by the CBRC office of the place where it is located.

Article 24: Articles 15 to 19 of the Regulations and Articles 16 to 23 hereof shall apply to the branches of wholly foreign-owned banks and Sino-foreign equity joint venture banks.

Article 25: If a foreign bank wishes to convert its branch(es) in China into a wholly foreign-owned bank in which its head office is the sole investor, it shall satisfy the conditions of the Regulations and these Rules for the establishment of a wholly foreign-owned bank and shall have the capacity to operate in China over the long term and to effectively manage the proposed wholly foreign-owned bank.

Article 26: A foreign bank that wishes to convert its branch(es) in China into a wholly foreign-owned bank in which its head office is the sole investor shall simultaneously apply for preparation for establishment of a wholly foreign-owned bank and for conversion of (all of) its branch(es) in China into branch(es) of the wholly foreign-owned bank. It shall submit the following application materials (in duplicate) to the banking regulatory bureau of the place where the head office of the proposed wholly foreign-owned bank is to be established, with copies to the CBRC offices of all of the places where its branches in China are located:

(1) a written application addressed to the chairperson of the CBRC and signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the foreign bank, which shall specify the names, locations and registered capital or operating capital of the proposed wholly foreign-owned bank and its (sub-)branches, the type(s) of business(es) applied for, etc.;

(2) a feasibility study report and the plan for the conversion of the institution(s);

(3) a draft of the proposed wholly foreign-owned bank's articles of association and a legal opinion on the draft articles of association issued by a law firm lawfully established in China;

(4) the resolution of the board of directors of the foreign bank agreeing to the conversion of the foreign bank's branch(es) into a wholly foreign-owned bank in which its head office is the sole investor;

(5) an opinion signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the foreign bank agreeing to the proposed wholly foreign-owned bank succeeding to the claims, debts and taxes of the foreign bank's former branch(es) and an undertaking to operate in China over the long term and to effectively manage the proposed wholly foreign-owned bank;

(6) audited consolidated financial accounting reports of all of the foreign bank's branches in China for the two years preceding the submission of the application;

(7) the opinion of the financial regulator of the applicant's domicile country or region on the conversion;

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

(9) other materials required by the CBRC.

The banking regulatory bureau of the place where the head office of the wholly foreign-owned bank is to be established shall forward the application materials together with its review opinion to the CBRC within 20 days from the date of receipt of the complete set of application materials.

The CBRC shall render its decision on whether or not to approve the conversion and notify the applicant in writing within six months from the date of receipt of the complete set of application materials. If it decides to withhold its approval, it shall explain the reason therefor.

Article 27: If the foreign bank wishes to retain one branch that engages in foreign exchange wholesale business, it shall submit an application to that effect together with its application for the preparation for establishment of the wholly foreign-owned bank.

The foreign bank's former branch(es) shall determine which claims, debts and taxes shall be succeeded to by the foreign bank's branch that engages in foreign exchange wholesale business and those that shall be succeeded to by the branch(es) of the wholly foreign-owned bank, and submit a list of the assets, liabilities and owner's equity together with a written application addressed to the chairperson of the CBRC and signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the applicant along with the application materials specified in Article 26 hereof (in duplicate) to the banking regulatory bureau of the place where the head office of the wholly foreign-owned bank is to be established, with copies to the CBRC offices of the places where the foreign bank's former branch(es) was(were) located.

Article 28: If a foreign bank wishes to convert its branch(es) in China into a wholly foreign-owned bank in which its head office is the sole investor, subject to the approval of the CBRC, the operating capital of the foreign bank's former branch(es) may, after consolidation and verification, be converted into the registered capital of the wholly foreign-owned bank, or, alternatively, be returned to their head office.

Article 29: A foreign bank wishing to convert its branches in China into a wholly foreign-owned bank in which its head office is the sole investor shall, once the wholly foreign-owned bank has passed the acceptance check and the preparatory work is completed, submit the acceptance opinion together with the following application materials (in duplicate) to the banking regulatory bureau of the place where the head office of the wholly foreign-owned bank is to be established, with copies to the CBRC offices of the places where the foreign bank's former branches were located:

(1) a written application for the commencement of business addressed to the chairperson of the CBRC and signed by the person in charge of the preparatory committee of the wholly foreign-owned bank, which shall specify the names, business addresses and registered capital or operating capital of the proposed wholly foreign-owned bank and its (sub-)branches, the types of business applied for, etc.

(2) a list of the proposed assets, liabilities and owner's equity to be turned over to the wholly foreign-owned bank;

(3) a registered capital verification certificate issued by a qualified accounting firm lawfully established in China;

(4) a list of the persons proposed to serve as the chairperson of the board of directors and manager of the wholly foreign-owned bank, the managers of the branches of the wholly foreign-owned bank and the managers of the sub-branches in the same city, their résumés and photocopies of their proofs of identity and academic qualifications;

(5) the powers of attorney of the managers of the branches of the wholly foreign-owned bank and the sub-branches in the same city;

(6) statements signed by the proposed persons that they do not have records of improper conduct; and

(7) other materials required by the CBRC.

The banking regulatory bureau of the place where the head office of the wholly foreign-owned bank is to be established shall forward the application materials, the acceptance opinion together with its review opinion to the CBRC within 20 days from the date of receipt of the complete set of application materials for the commencement of business.

The CBRC shall render its decision on whether or not to approve 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. If it decides to withhold its approval, it shall explain the reason therefor.

Article 30: If the foreign bank intends to retain one branch in China that engages in foreign exchange wholesale business, it shall, at the time the proposed wholly foreign-owned bank applies for the commencement of business, submit the following application materials (in duplicate) to the banking regulatory bureau of the place where the head office of the wholly foreign-owned bank is to be established, with copies to the CBRC offices of the places where the foreign bank's former branches were located:

(1) a written application addressed to the chairperson of the CBRC and signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the foreign bank, which shall specify the location and operating capital of the branch to be retained, the type of business applied for, etc.;

(2) a feasibility study report;

(3) a list of the assets, liabilities and owner equity of the foreign bank's branch to be retained for the purpose of engaging in foreign exchange wholesale business;

(4) a capital verification certificate issued by a qualified accounting firm lawfully established in China; and

(5) other materials required by the CBRC.

The banking regulatory bureau of the place where the head office of the wholly foreign-owned bank is to be established shall forward the application materials together with its review opinion to the CBRC within 20 days from the date of receipt of the complete set of application materials.

The CBRC shall render its decision on whether or not to approve the retention of one foreign bank's branch that engages in foreign exchange wholesale business and notify the applicant in writing within two months from the date of receipt of the complete set of application materials. If it decides to withhold its approval, it shall explain the reason therefor.

Article 31: A foreign bank that converts its branch(es) in China into a wholly foreign-owned bank in which its head office is the sole investor shall, during the preparatory period for the proposed wholly foreign-owned bank and after completion of the registration procedures, publish an announcement in the national newspaper(s) designated by the CBRC and the local newspaper(s) designated by the local CBRC office.

Article 32: Once the representative office of a foreign bank has received approval for establishment, it shall carry out registration procedures with the administration for industry and commerce in accordance with relevant provisions.

Once the representative office of a foreign bank has completed registration procedures, it shall publish an announcement in the national newspaper(s) designated by the CBRC and the local newspaper(s) designated by the CBRC office of the place where it is located.

The representative office of a foreign bank shall move into permanent office premises within six months from the date of approval of its establishment by the CBRC. If it fails to commence work within six months, the original approval decision of the CBRC shall become null and void.

Article 33: Once the representative office of a foreign bank has moved into permanent office premises, it shall submit the following materials to the CBRC office of the place where it is located:

(1) a form for the registration of the basic particulars of the representative office;

(2) a photocopy of the business registration certificate;

(3) details of its internal control systems, including its duty arrangements, internal division of labour and internal reporting system, etc.;

(4) a photocopy of the lease contract or title certificate for the office premises;

(5) information on the office facilities equipped and on the lease of data communication lines from the telecommunications department;

(6) specimens of its official stamp and letterhead paper, and of the business cards of its working personnel; and

(7) other materials required by the CBRC.

Article 34: The "other materials" mentioned in Item (6) of Article 17 of the Regulations shall, at minimum, include photocopies of the proof of identity and academic qualifications of the main person in charge and a statement signed by him/her that he/she does not have a record of improper conduct.

For the purposes of Article 17 of the Regulations and the preceding paragraph of this Article, the term "main person in charge" means the chairperson of the board of directors, manager (or chief executive officer or general manager).

Article 35: If a wholly foreign-owned bank or Sino-foreign equity joint venture bank is to make a change to its registered capital or shareholders or adjust its shareholders' shareholding percentages, or if a foreign bank is to make a change to the operating capital of a branch in China, it shall submit the following application materials (in duplicate) to the local banking regulatory bureau, with a copy to the CBRC office of the place where the foreign-invested banking institution of a business nature is located:

(1) a written application addressed to the chairperson of the CBRC and signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the applicant;

(2) the resolution of the board of directors of the wholly foreign-owned bank or Sino-foreign equity joint venture bank on the change;

(3) the resolutions of the boards of directors or the opinions signed by the legal representatives of the investors in the wholly foreign-owned bank or Sino-foreign equity joint venture bank on the change, and if the transferor or the intended transferee of the wholly foreign-owned bank or Sino-foreign equity joint venture bank is financial institution, the opinion of the financial regulator of its domicile country or region on the change;

(4) the transfer agreement or contract executed by the relevant shareholder(s) of the wholly foreign-owned bank or Sino-foreign equity joint venture bank; and

(5) other materials required by the CBRC.

The local banking regulatory bureau shall forward the application materials together with its review opinion to the CBRC within 20 days from the date of receipt of the complete set of application materials.

The CBRC shall render its decision on whether or not to approve the change and notify the applicant in writing within three months from the date of receipt of the complete set of application materials. If it decides to withhold its approval, it shall specify the reason therefor.

Article 36: If a foreign-invested banking institution of a business nature receives approval to make a change to its registered capital or operating capital, or its shareholders or adjust its shareholders' shareholding percentages, it shall engage a qualified accounting firm lawfully established in China to carry out a capital verification and submit the capital verification certificate to the CBRC office of the place where it is located within 30 days from the date of receipt of the approval document from the CBRC.

Article 37: If, due to a merger or division, a foreign bank intends to change the names of its (sub-)branches in China, it may submit a preliminary application together with the following application materials to the CBRC:

(1) a written application addressed to the chairperson of the CBRC and signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the foreign bank; and

(2) the permission document or approval certificate issued by the financial regulator of the foreign bank's domicile country or region with respect to its merger or division.

Once the CBRC has received the complete set of application materials, it shall confirm the application in the form of a signed letter.

Within five days of the occurrence of the formal merger, division or other such change, the foreign bank shall report the same to the CBRC and the CBRC offices of the places where its (sub-)branches in China are located and, within 30 days, it shall submit the following application materials (in duplicate) to the CBRC:

(1) a written application addressed to the chairperson of the CBRC and signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the applicant;

(2) a completed application form issued by the CBRC;

(3) the applicant's articles of association;

(4) an organizational chart of the applicant and lists of its board members and major shareholders;

(5) an undertaking of liability for the taxes and debts of its branches in China signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the applicant;

(6) the applicant's consolidated financial statements;

(7) the résumés and photocopies of the proofs of identity and academic qualifications of the managers (or general managers) of the applicant's branches in China and chief representative(s);

(8) the powers of attorney of the managers (or general managers) of the applicant's branches in China and chief representative(s) signed by its chairperson of the board of directors or manager (or chief executive officer or general manager);

(9) a photocopy of the applicant's business licence or a photocopy of another document granting permission to engage in the finance business and the permission document or approval certificate issued by the financial regulator of the foreign bank's domicile country or region with respect to the change; and

(10) other materials required by the CBRC.

At the time that the foreign bank submits the preliminary application and the formal application materials for the change to the CBRC, it shall forward copies of the application materials to CBRC offices of the places where its (sub-)branches in China are located.

The CBRC shall render its decision on whether or not to approve the change and notify the applicant in writing within three months from the date of receipt of the complete set of application materials. If it decides to withhold its approval, it shall specify the reason therefor.

Article 38: If a foreign bank applies to change the names of its (sub-)branches in China for another reason, it shall submit the following application materials (in duplicate) to the CBRC, with copies to the CBRC offices of the places where its (sub-)branches in China are located:

(1) a written application addressed to the chairperson of the CBRC and signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the applicant; and

(2) a photocopy of the applicant's post-change business licence or a photocopy of another document granting permission to engage in the finance business and the approval certificate for its change of name issued by the financial regulator of the its domicile country or region; and

(3) other materials required by the CBRC.

The CBRC shall render its decision on whether or not to approve the change and notify the applicant in writing within three months from the date of receipt of the complete set of application materials. If it decides to withhold its approval, it shall specify the reason therefor.

Article 39: The post-merger or post-division registered capital or operating capital and scope of business of a foreign-invested banking institution of a business nature shall be subject to approval anew by the CBRC.

Article 40: If a wholly foreign-owned bank or Sino-foreign equity joint venture bank is to change its name, it shall submit to the CBRC a written application (in duplicate) addressed to the chairperson of the CBRC and signed by its chairperson of the board of directors or manager (or chief executive officer or general manager), with a copy to the CBRC office of the place where its head office is located.

The CBRC shall render its decision on whether or not to approve the change and notify the applicant in writing within three months from the date of receipt of the complete set of application materials. If it decides to withhold its approval, it shall specify the reason therefor.

Article 41: If a foreign-invested banking institution of a business nature or a (sub-)branch thereof is to change its place of business within the same city, or if the representative office of a foreign bank is to change its office address within the same city, it shall submit the following application materials to the CBRC office of the place where it is located:

(1) a written application addressed to the CBRC office of the place where it is located and signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the wholly foreign-owned bank or Sino-foreign equity joint venture bank, or the manager (or general manager) of the foreign bank's branch or the chief representative of the representative office;

(2) a photocopy of the letter of intent on the lease or purchase contract for the place of business or office address to which the foreign-invested bank intends to relocate; and

(3) other materials required by the CBRC.

The local CBRC office shall conduct an acceptance check of the proposed new place of business of the foreign-invested banking institution of a business nature or its (sub-)branch. If the place of business passes the acceptance check, the CBRC office shall issue an acceptance opinion, and if it fails to pass the acceptance check, the CBRC office shall explain the reason therefor. The foreign-invested banking institution of a business nature may reapply to the CBRC office for a new acceptance check commencing 10 days after receipt of the notice of the failure to pass the acceptance check.

The CBRC office shall render its decision on whether or not to approve the change in place of business or office address and notify the applicant in writing within three months from the date of receipt of the complete set of application materials. Additionally, it shall forward such decision by level to the CBRC. If it decides to withhold its approval, it shall specify the reason therefor.

The foreign-invested bank may not relocate to its new place of business or office address until it has received the approval for the change from the CBRC office of the place where it is located.

Article 42: If a change in the matters stated in the articles of association of a wholly foreign-owned bank or Sino-foreign equity joint venture bank occurs, the wholly foreign-owned bank or Sino-foreign equity joint venture bank shall amend its articles of association within one year after such change. When applying to amend its articles of association, the applicant shall submit the following application materials (in duplicate) to the banking regulatory bureau of the place where it is located, with a copy to the CBRC office of the place where it is located:

(1) a written application addressed to the chairperson of the CBRC and signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the applicant;

(2) the resolution of the shareholders' general meeting or board of directors of the applicant;

(3) the applicant's existing articles of association and a draft of the new articles of association;

(4) a comparative table showing the changes between the existing articles of association and the draft of the new articles of association;

(5) a legal opinion on the draft of the new articles of association issued by a law firm lawfully established in China; and

(6) other materials required by the CBRC.

The local banking regulatory bureau shall forward the application materials together with its review opinion to the CBRC within 20 days from the date of receipt of the complete set of application materials.

The CBRC shall render its decision on whether or not to approve the amendment of the articles of association and notify the applicant in writing within three months from the date of receipt of the complete set of application materials. If it decides to withhold its approval, it shall specify the reason therefor.

Article 43: If a foreign-invested banking institution of a business nature intends to suspend business for a period between three days (inclusive) and six months, it shall submit an application to the CBRC office of the place where it is located, explaining the reason for the suspension and setting forth the arrangements for the period during which its business are suspended.

The local CBRC office shall render its decision on whether or not to approve the suspension of business within 10 days from the date of receipt of the application for the suspension of business from the foreign-invested banking institution of a business nature. If it decides to withhold its approval, it shall specify the reason therefor.

If its suspension of business is approved, the foreign-invested banking institution of a business nature shall post an announcement to such effect at its place of business.

Article 44: Once the approved period of suspension of business expires or the reason for the suspension of business is eliminated, the institution that suspended business shall resume its business. The applicant that has applied for suspension of business earlier shall submit a report to the CBRC office of the place where it is located within five days after resuming business. If the institution's place of business was constructed anew, the applicant may only resume business once it has submitted to the local CBRC office a photocopy of the letter of intent on the lease or on the purchase contract for the place of business and photocopies of the structure safety and fire safety certificates.

If, under special circumstances, the period of suspension of business needs to be extended, a new application shall be made in accordance with Article 43 hereof.

Article 45: If a foreign-invested banking institution of a business nature is characterized by any of the circumstances specified in Article 27 of the Regulations and needs to amend the particulars recorded on its finance permit, it shall carry out amendment procedures in accordance with relevant provisions for the administration of finance permits.

If a capital verification is required, the foreign-invested banking institution of a business nature shall submit the capital verification certificate issued by a qualified accounting firm lawfully established in China to the CBRC office of the place where the institution is located. If an acceptance check is required, the CBRC office of the place where the foreign-invested banking institution of a business nature is located shall conduct the acceptance check.

The foreign-invested banking institution of a business nature shall carry out procedures for the amendment of registration with, and collect its new business licence from, the administration for industry and commerce on the strength of the approval document from the CBRC.

If the foreign-invested banking institution of a business nature is characterized by any of the circumstances specified in Items (1) to (3) of Article 27 of the Regulations, it shall publish an announcement in the national newspaper(s) designated by the CBRC and the local newspaper(s) designated by the CBRC office of the place where it is located. The announcement shall be made within 30 days from the effective date of the business licence.

Article 46: After a representative office of a foreign bank has changed its name, changed its office premises or another such change has occurred, it shall publish an announcement in the local newspaper(s) designated by the CBRC office of the place where it is located after it has completed the procedures for amendment of business registration.

PART THREE: SCOPE OF BUSINESS

Article 47: "Dealing in government bonds and financial bonds, and dealing in other negotiable securities, other than stocks, denominated in foreign currencies" as mentioned in Item (4) of Article 29 and Item (4) of Article 31 of the Regulations includes but is not limited to the following foreign exchange investment business: Chinese and foreign government bonds, bonds of Chinese financial institutions and bonds of Chinese non-financial institutions issued outside China.

Article 48: For the purposes of Item (12) of Article 29 and Item (11) of Article 31 of the Regulations, the phrase "provision of credit investigation and consulting services" means credit investigation and consulting services relating to banking business.

Article 49: A foreign bank's branch that engages in the foreign exchange business specified in Article 31 of the Regulations shall have operating capital of not less than Rmb200 million or the equivalent in a freely convertible currency.

Article 50: A foreign bank's branch that engages in the foreign exchange business and renminbi business specified in Article 31 of the Regulations shall have operating capital of not less than Rmb300 million or the equivalent in a freely convertible currency, and not less than Rmb100 million thereof shall be operating capital denominated in renminbi.

Article 51: A foreign bank's branch that has been converted into a wholly foreign-owned bank in which its head office is the sole investor may succeed to all of the business that the foreign bank's former branch was approved to engage in.

Article 52: A wholly foreign-owned bank or Sino-foreign equity joint venture bank shall authorize its (sub-)branches to engage in business falling within its approved scope of business.

A foreign bank's branch shall authorize its sub-branches in the same city to engage in business falling within its approved scope of business.

Article 53: Article 34 of the Regulations refers to the conditions that a foreign-invested banking institution of a business nature is required to satisfy when applying to engage in renminbi business for the first time and Items (1) and (2) thereof mean that the foreign-invested banking institution of a business nature intending to apply to engage in renminbi business has been in business for three years or more and that it has been profitable for two years in succession prior to the submission of its application. The phrase "has been in business for three years" means a full three years from the date on which the foreign-invested banking institution of a business nature received approval to commence business to the application date. The phrase "has been profitable for two years in succession prior to the submission of its application" means that the financial accounting reports of the foreign-invested banking institution of a business nature for the two financial years prior to the date of the application indicate a profit.

A foreign-invested banking institution of a business nature that has received approval to engage in renminbi business and applies to expand the scope of the customers to which it provides the renminbi services shall satisfy the prudential conditions specified by, and be subject to the examination and approval of, the CBRC.

Article 54: A wholly foreign-owned bank or Sino-foreign equity joint venture bank that provides renminbi services to citizens in China shall, in addition to satisfying the prudential conditions specified by the CBRC, have business outlets that conform with the particular characteristics of its business and its business development requirements.

Article 55: When a foreign-invested banking institution of a business nature applies to engage in renminbi business or expand the scope of the customers to which it provides renminbi services, it shall submit the following application materials (in duplicate) to the banking regulatory bureau of the place where it is located, with a copy to the CBRC office of the place where it is located:

(1) a written application addressed to the chairperson of the CBRC and signed by the chairperson of the board of directors or manager (or chief executive officer or general manager) of the applicant;

(2) a feasibility study report;

(3) details of the internal control systems and operating rules for the proposed business;

(4) audited balance sheets and profit and loss statements for the two financial years preceding the application date; and

(5) other materials required by the CBRC.

The local banking regulatory bureau shall forward the application materials together with its review opinion to the CBRC within 20 days from the date of receipt of the complete set of application materials.

The CBRC shall render its decision on whether or not to approve the engagement in renminbi business or expansion of the scope of the customers to which the renminbi services are provided and notify the applicant in writing within three months from the date of receipt of the complete set of application materials. If it decides to withhold its approval, it shall specify the reason therefor.

Article 56: The foreign-invested banking institution of a business nature shall complete the following preparatory work within four months from the date of receipt of the approval from the CBRC for engaging in renminbi business or expanding the scope of the customers to which its provides renminbi services:

(1) having a sufficient number of business personnel that satisfy its business development requirements;

(2) printing of important business vouchers and receipts to be used externally and submitting specimens thereof to the CBRC office of the place it is located;

(3) putting in place security facilities approved by the relevant departments and submitting photocopies of the relevant supporting documentation to the CBRC office of the place where it is located;

(4) establishing sound internal control systems and operating rules for the renminbi business and submitting details to the CBRC office of the place where it is located; and

(5) if it needs to increase its registered capital or operating capital, engaging a qualified accounting firm lawfully established in China to carry out a capital verification and submitting the capital verification certificate to the CBRC office of the place where it is located.

If the foreign-invested banking institution of a business nature fails to complete the preparatory work within four months, the CBRC's earlier approval decision shall automatically become null and void.

Article 57: Once a foreign-invested banking institution of a business nature has completed its preparatory work, it shall apply to the CBRC office of the place where it is located for an acceptance check. The CBRC office of the place where it is located shall conduct the acceptance check within 10 days. If the foreign-invested banking institution of a business nature passes the acceptance check, it shall be issued an acceptance opinion. If it fails the acceptance check, it may apply to the CBRC office of the place where it is located for a re-check commencing 10 days after the date of receipt of the notice.

The foreign-invested banking institution of a business nature shall collect its approval certificate from the CBRC on the strength of the acceptance opinion.

Article 58: Branches of a wholly foreign-owned bank or Sino-foreign equity joint venture bank shall, as authorized, engage in renminbi business within the scope of business of their head office. Before commencing such business, such a branch shall carry out the preparatory work in accordance with Article 56 hereof and submit to the CBRC office of the place where it is located the authorization letter from its head office to engage in renminbi business.

Once the branch of a wholly foreign-owned bank or Sino-foreign equity joint venture bank has completed its preparatory work, it shall apply to the CBRC office of the place where it is located for an acceptance check. The CBRC office of the place where it is located shall conduct the acceptance check within 10 days after receipt of the materials for the acceptance check. If the branch passes the acceptance check, it shall be issued an acceptance opinion. If it fails the acceptance check, it may apply to the CBRC office of the place where it is located for a re-check commencing 10 days after the date of receipt of the notice.

The branch of the wholly foreign-owned bank or Sino-foreign equity joint venture bank shall collect its written confirmation for engaging in renminbi business from the CBRC on the strength of the acceptance opinion and carry out the procedures for the amendment of its business licence with the administration for industry and commerce.

Article 59: When a foreign-invested banking institution of a business nature or a (sub-) branch thereof is to engage in renminbi business or expand the scope of the customers to which it provides renminbi services, it shall publish an announcement in the national newspaper(s) designated by the CBRC and the local newspaper(s) designated by the CBRC office of the place where it is located.

Article 60: If a foreign-invested banking institution of a business nature is to engage in the business specified in Item (13) of Article 29 or Item (12) of Article 31 of the Regulations, it shall submit the following application materials (in duplicate) to the banking regulatory bureau of the place where the head office of the wholly foreign-owned bank or Sino-foreign equity joint venture bank, or the foreign bank's managing branch is located, with a copy to the CBRC office of the place where the foreign-invested banking institution of a business nature is located:

(1) a written application addressed to the chairperson of the CBRC and signed by the authorized signatory of the applicant;

(2) a detailed description of the proposed business and the internal control systems and the operating rules therefor; and

(3) other materials required by the CBRC.

The local banking regulatory bureau shall forward the application materials together with its review opinion to the CBRC within 20 days from the date of receipt of the complete set of application materials.

The CBRC shall render its decision on whether or not to grant its approval and notify the applicant in writing within three months from the date of receipt of the complete set of application materials. If it decides to withhold its approval, it shall specify the reason therefor.

Article 61: When a foreign-invested banking institution of a business nature or a (sub-) branch thereof is to deal in a new product falling within its scope of business, it shall report the same in writing to the CBRC office of the place where it is located within five days after commencing to deal in such product. Such report shall include a description of the new product, the characteristics of the risks therein, the internal control systems and operating rules therefor, etc.

Article 62: Foreign-funded banking institutions of a business nature may engage in renminbi interbank lending business in accordance with relevant provisions.

PART FOUR: ADMINISTRATION OF PROFESSIONAL QUALIFICATIONS

Article 63: For the purposes of the Regulations and these Rules, the term "senior management personnel" means the management personnel of a foreign-invested bank whose qualifications to serve in such capacity are subject to the check and approval of the CBRC or the local banking regulatory bureau.

Article 64: Persons serving as the directors, senior management personnel or chief representative of a foreign-invested bank shall be natural persons with full civil capacity and satisfy the following basic conditions:

(1) he/she shall be familiar with and abide by the laws, administrative regulations and rules of China;

(2) he/she shall have good professional ethics, personal integrity, conduct and reputation, have a good compliance record of the law and other rules and no record of improper conduct;

(3) he/she shall have an undergraduate or higher degree from a university and the professional knowledge, work experience and organizational and management skills appropriate for the position in which he/she serves. If he/she does not have an undergraduate or higher degree from a university, he/she shall have at least six years of finance work experience or at least eight years of related economic work experience (of which at least four years shall be finance work experience); and

(4) he/she shall have the independence required to perform his/her duties.

Article 65: A director, member of the senior management personnel or chief representative of a foreign-invested bank may not perform his/her duties until his/her qualifications to serve in such position have been checked and approved by the CBRC or the local banking regulatory bureau.

Article 66: A person may not serve as a director, member of the senior management personnel or chief representative of a foreign-invested bank if:

(1) he/she has a criminal record involving a deliberate act or gross negligence;

(2) he/she is serving or has served as a director or member of the senior management personnel of an institution that has gone into receivership, been closed down, merged, declared bankrupt or had its business licence revoked as result of illegal business, unless he/she is able to establish that he/she was not at fault;

(3) he/she directed or participated in the interference with or obstruction of a monitoring inspection of, or the investigation of a case involving, an institution in which he/she served that was carried out by the CBRC or an office thereof;

(4) he/she breached professional ethics, violated personal integrity or committed a serious dereliction of duty resulting in the institution in which he/she served incurring a material loss or suffering an adverse effect;

(5) he/she or his/her spouse is burdened by a relatively large debt and is insolvent;

(6) laws, administrative regulations or departmental rules specify that he/she may not serve as a director, member of the senior management personnel or chief representative of a financial institution; or

(7) he/she is characterized by another circumstance determined by the CBRC.

Article 67: The CBRC shall be responsible for the approval and revocation of the qualifications to serve in their positions in foreign-invested banks of the following persons:

(1) the chairperson of the board of directors, manager (or chief executive officer or general manager) of wholly foreign-owned banks and Sino-foreign equity joint venture banks, and the manager (or general manager) of the branches of wholly foreign-owned banks and Sino-foreign equity joint venture banks;

(2) the manager (or general manager) of foreign bank's branches; and

(3) the chief representative of the representative offices of foreign banks.

Article 68: The CBRC has delegated to the banking regulatory bureaux of the places where foreign-invested banks are located the authority to check and approve professional qualifications when managers of branches of wholly foreign-owned banks and Sino-foreign equity joint venture banks, managers (or general managers) of foreign bank's branches and chief representatives of representative offices are replaced.

Article 69: A banking regulatory bureau shall be responsible for the approval and revocation of the qualifications of the following persons to serve in their positions in foreign-invested banks within the bureau's jurisdiction:

(1) the directors, vice chairpersons of the board of directors, board secretary, deputy managers (or deputy general managers), managerial assistant, chief operating officer, chief risk control officer, chief financial officer (or financial controller or person in charge of financial affairs), chief technical officer and persons in charge of internal audits and legal compliance of wholly foreign-owned banks and Sino-foreign equity joint venture banks;

(2) the deputy manager(s) (or deputy general manager(s)) and person in charge of legal compliance of the branches of wholly foreign-owned banks and Sino-foreign equity joint venture banks and the deputy manager(s) (or deputy general manager(s)) and person in charge of legal compliance of foreign bank's branches;

(3) sub-branch managers; and

(4) other persons who have decision making authority with respect to operations and management or have an important role in risk control.

Article 70: A director, member of the senior management personnel or chief representative of a foreign-invested bank who serves in any of the following positions shall satisfy the conditions set forth below:

(1) if he/she serves as the chairperson of the board of directors of a wholly foreign-owned bank or Sino-foreign equity joint venture bank, he/she shall have at least 8 years of finance work experience or at least 12 years of related economic work experience (of which at least 5 years shall be finance work experience);

(2) if he/she serves as a vice chairperson of the board of directors of a wholly foreign-owned bank or Sino-foreign equity joint venture bank, he/she shall have at least 5 years of finance work experience or at least 10 years of related economic work experience (of which at least 3 years shall be finance work experience);

(3) if he/she serves as the manager (or chief executive officer or general manager) of a wholly foreign-owned bank or Sino-foreign equity joint venture bank, he/she shall have at least 8 years of finance work experience or at least 12 years of related economic work experience (of which at least 4 years shall be finance work experience);

(4) if he/she serves as the board secretary, deputy manager (or deputy general manager), managerial assistant, chief operating officer, chief risk control officer, chief financial officer (or financial controller or person in charge of financial affairs) or chief technical officer of a wholly foreign-owned bank or Sino-foreign equity joint venture bank or the manager (or general manager) of a branch of a wholly foreign-owned bank, Sino-foreign equity joint venture bank or foreign bank, he/she shall have at least 5 years of finance work experience or at least 10 years of related economic work experience (of which at least 3 years shall be finance work experience);

(5) if he/she serves as a director of a wholly foreign-owned bank or Sino-foreign equity joint venture bank, he/she shall have at least 5 years of economic, finance, legal or financial related work experience, and be capable of using financial statements and statistical statements to judge the business, management and risk positions of a bank, understand the bank's corporate governance structure, articles of association, duties of the board of directors and the rights and obligations of the directors;

(6) if he/she serves as a deputy manager (or deputy general manager) of a branch of a wholly foreign-owned bank, Sino-foreign equity joint venture bank or foreign bank or as a sub-branch manager, he/she shall have at least 4 years of finance work experience or at least 6 years of related economic work experience (of which at least 2 years shall be finance work experience);

(7) if he/she serves as the person in charge of internal audits or legal compliance of a wholly foreign-owned bank or Sino-foreign equity joint venture bank, he/she shall have at least 4 years of finance work experience;

(8) if he/she serves as the person in charge of legal compliance of a branch of a wholly foreign-owned bank, Sino-foreign equity joint venture bank or foreign bank, he/she shall have at least 3 years of finance work experience; or

(9) if he/she serves as the chief representative of the representative office of a foreign bank, he/she shall have at least 3 years of finance work experience or at least 6 years of related economic work experience (of which at least 1 year shall be finance work experience).

Article 71: When a foreign-invested bank applies for the check and approval of the qualifications of a person to serve as a director, member of its senior management personnel or chief representative, it shall submit the following application materials (in duplicate) to the banking regulatory bureau of the place where the institution in which he/she is to serve is located, with a copy to the CBRC office of the place where the institution in which he/she is to serve is located:

(1) a written application addressed to the CBRC and signed by the authorized signatory of the applicant: if subject to the approval of the CBRC, addressed to the chairperson of the CBRC, and if subject to the approval of the banking regulatory bureau, addressed to the bureau head of the relevant banking regulatory bureau; the application shall specify the proposed position, duties and authority of the proposed person and the status of the position in the organizational structure of the institution;

(2) the power of attorney of the proposed person signed by the authorized signatory of the applicant and the signatory's power of attorney;

(3) photocopies of the proof of identity and academic qualifications of the proposed person;

(4) the résumé of the proposed person and a detailed explanation of his/her future duty performance plan;

(5) a statement signed by the proposed person that he/she has no record of improper conduct and an undertaking that he/she will abide by the law and duly perform his/her duties after taking up his/her position;

(6) if the articles of association of the wholly foreign-owned bank or Sino-foreign equity joint venture bank requires the convening of a shareholders' meeting or a meeting of the board of directors, the relevant resolution; and

(7) other materials required by the CBRC.

Article 72: The résumé and the photocopies of the proof of identity and academic qualifications of the proposed person mentioned in the Regulations and these Rules shall be signed by the authorized signatory.

Article 73: If a proposed person has served as a director, member of the senior management personnel or chief representative of a banking financial institution in China, the CBRC or the local banking regulatory bureau may, as required, before approving his/her qualifications to serve in the proposed position, seek the opinion of the banking regulatory bureau of the place where the institution in which the proposed person previously served is located.

The banking regulatory bureau of the place where the institution in which the proposed person previously served is located shall provide feedback in a timely manner.

Article 74: After the foreign-invested bank has submitted the professional qualification application materials, the CBRC or local banking regulatory bureau may interview the proposed person before he/she takes up his/her position.

Article 75: If the manager (or chief executive officer or general manager) of a foreign-invested banking institution of a business nature or the chief representative of the representative office of a foreign bank is to be absent from his position for one month or more, he/she shall submit a written report to the local CBRC office and designate someone to perform his/her duties on his/her behalf. If, in the absence of special circumstances, he/she is absent from his/her position for three consecutive months or more, he/she shall be replaced.

Article 76: If a director, member of the senior management personnel or chief representative of a foreign-invested bank is characterized by any of the following circumstances, the CBRC or its office may, depending on the circumstances, revoke his/her qualifications to serve in his/her position for a fixed period of time up to a lifetime ban:

(1) he/she has his/her criminal liability pursued in accordance with the law;

(2) he/she refuses, interferes with, obstructs or seriously affects the regulation carried out in accordance with the law by the CBRC or its office;

(3) the institution in which he/she serves suffers a material property loss or a major financial crime occurs due to a lack of soundness in its internal management and control systems or lax implementation or supervision thereof;

(4) the institution in which he/she serves goes into receivership, is merged or is declared bankrupt due to operating in serious violation of laws or regulations, unsound internal controls or long-term incompetent operation and management;

(5) the institution in which he/she serves incurs material losses due to long-term incompetent operation and management;

(6) the CBRC discovers that an incumbent director, member of the senior management personnel or chief representative of a foreign-invested bank had committed a violation of laws or regulations before taking up his/her position or other circumstances that make him/her ineligible to serve in his/her position; or

(7) he/she is characterized by another circumstance determined by the CBRC.

Article 77: If the qualifications of the proposed person for the position in which he/she is to serve require a submission to the CBRC for check and approval, the local banking regulatory bureau shall forward the application materials together with its review opinion to the CBRC within 20 days from the date of receipt of the complete set of application materials. The CBRC shall render its decision on whether or not to grant its approval and notify the applicant in writing within 30 days from the date of receipt of the complete set of application materials. If it decides to withhold its approval, it shall explain the reason therefor.

If the qualifications of the proposed person for the position in which he/she is to serve require a submission to the local banking regulatory bureau for approval, the local banking regulatory bureau shall render its decision on whether or not to grant its approval and notify the applicant in writing within 30 days from the date of receipt of the complete set of application materials. If it decides to withhold its approval, it shall explain the reason therefor.

PART FIVE: REGULATION

Article 78: A foreign-invested banking institution of a business nature shall establish internal control systems and operating rules appropriate to the development of its China business and shall submit the amendments made to such internal control systems and operating rules to the CBRC office of the place where it is located by the end of March each year.

Article 79: A wholly foreign-owned bank or Sino-foreign equity joint venture bank shall establish an independent risk management department, compliance department and internal audit department.

A foreign bank's branch shall designate a dedicated department or person to be responsible for compliance work.

Article 80: Once a foreign-invested banking institution of a business nature completes an internal audit, it shall timely submit the internal audit report to the CBRC office of the place where it is located. The CBRC office of the place where it is located may adopt appropriate means to communicate with the internal audit personnel of the foreign-invested banking institution of a business nature.

Article 81: A foreign-invested banking institution of a business nature shall establish a system for classifying loan risks and submit the correspondence between its loan risk classification criteria and the classification standards specified by the CBRC to the CBRC office of the place where it is located.

Article 82: For the purposes of Article 40 of the Regulations, the phrase "provisions on the administration of asset-liability ratios" means the provisions of Article 39 of the PRC Commercial Banking Law.

The provisions of the system of indicators for banking regulatory statements shall apply to the method of calculating the asset-liability ratio of wholly foreign-owned banks and Sino-foreign equity joint venture banks and it shall be assessed by way of the consolidated statement approach under which renminbi and foreign currency amounts are calculated together.

Article 83: A wholly foreign-owned bank or Sino-foreign equity joint venture bank shall establish a system for the management of affiliated transactions. Affiliated transactions must comply with commercial principles and the transaction terms may not be more favorable than the terms of transactions conducted with non-affiliated parties.

The CBRC and its offices shall determine affiliated parties and affiliated transactions in accordance with relevant measures for the administration of the affiliated transactions of commercial banks.

Article 84: A foreign-invested banking institution of a business nature shall formulate policies and management systems for the outsourcing of business, including the decision making procedure for the outsourcing of business, the evaluation and management of contractors, measures and contingency plans to control the confidentiality and security of bank information, etc.

Before a foreign-invested banking institution of a business nature executes an agreement for the outsourcing of business, it shall report to the CBRC office of the place where it is located the principal risks under the agreement and the corresponding risk avoidance measures taken, etc.

Article 85: The "interest bearing assets" of a foreign bank's branch as mentioned in Article 44 of the Regulations shall include interest bearing foreign exchange assets and interest bearing renminbi assets.

Thirty percent of the operating capital denominated in foreign exchange of a foreign bank's branch shall be interest bearing foreign exchange assets in the form of foreign currency term deposits with a term of at least six months, and 30% of its operating capital denominated in renminbi shall be interest bearing renminbi assets in the form of renminbi denominated sovereign bonds or renminbi term deposits with a term of at least six months.

The interest bearing assets of a foreign bank's branch in the form of term deposits shall be deposited with no more than three Chinese-invested commercial banks in China whose business is stable and that have a certain strength. A foreign bank's branch may not pledge or buy back interest bearing assets that it holds in the form of sovereign bonds or otherwise treat the interest bearing assets in a manner that affects its control over them.

A foreign bank's branch shall submit a report on its interest bearing assets to the CBRC office of the place where it is located at the end of June and again at the end of December each year, which shall specify the banks with which its term deposits are deposited, their amounts and terms, and the interest rates thereon, the amount in renminbi denominated sovereign bonds it holds, their forms and maturity dates, etc.

If a foreign bank's branch wishes to change the form of its interest bearing assets or a bank with which it has deposited term deposits, it shall require the approval of the CBRC office of the place where it is located. A foreign bank's branch may not utilize its interest bearing assets without the approval of the CBRC office of the place where it is located.

Article 86: For the purposes of Article 45 of the Regulations, the phrase "the total of operating capital plus reserves, etc." means the total of operating capital, retained profits and general reserve for loan losses; the term "risk assets" means both on and off balance sheet risk-weighted assets calculated in accordance with relevant provisions on risk-weighted assets.

The percentage specified in Article 45 of the Regulations shall be calculated by each individual branch in China of the foreign bank and the balance shall be assessed at the end of each quarter.

Article 87: The current assets of a foreign bank's branch shall include cash, gold, deposits with the People's Bank of China, deposits with other banks, placements with other banks maturing within one month, loans to other banks maturing within one month, net assets of transactions with affiliated banks and subsidiaries overseas, interest receivable and other receivables due within one month, loans maturing within one month, bond investments maturing within one month, other bond investments on secondary markets in China and abroad that can be realized at any time and other assets that can be realized within one month. The portion of the foregoing assets that is deemed unrecoverable shall be deducted from the current assets. The interest bearing assets shall not be counted as part of current assets.

A foreign bank's branch's current liabilities shall include current deposits, term deposits maturing within one month, deposits from other banks, placements from other banks maturing within one month, loans from other banks maturing within one month, net liabilities of transactions with affiliated banks and subsidiaries overseas, interest payable and other payables maturing within one month and other liabilities maturing within one month. Frozen deposits shall not be counted as part of current liabilities.

A foreign bank's branch shall calculate its renminbi and foreign currency liquidity percentages separately each day and maintain the same in line with Article 46 of the Regulations. The same shall be assessed by each individual branch in China of the foreign bank.

Article 88: The "balance of renminbi and foreign currency assets in China" and "the balance of renminbi and foreign currency liabilities in China" mentioned in Article 47 of the Regulations shall be calculated as follows:

balance of renminbi and foreign currency assets in China = total renminbi and foreign currency assets