Measures for the Administration of Pilot Projects for the Investment by Commercial Banks in the Equity of Insurance Companies

(Issued by the China Banking Regulatory Commission on, and effective as of, November 5 2009.)

Yin Jian Fa [2009] No.98

Part One: General provisions

Article 1: These Measures have been formulated pursuant to laws and regulations such as the PRC Company Law, the PRC Banking Regulation Law and the Commercial Banking Law in order to regulate the investment by commercial banks in the equity of insurance companies and promote the lawful and orderly conduct of pilot projects for the investment by commercial banks in the equity of insurance companies.

Article 2: For the purposes of these Measures, the term “commercial bank” means a commercial bank established in the People's Republic of China with the approval of the China Banking Regulatory Commission (CBRC). For the purposes of these Measures, the term “insurance company” means an insurance company established in the People's Republic of China with the approval of the insurance regulatory department.

Article 3: Plans for pilot projects for the investment and taking of an equity interest in insurance companies by commercial banks shall be submitted by the regulatory departments to the State Council for approval and decision. Each commercial bank may invest in only one insurance company.

Part Two: Administration of access

Article 4: A commercial bank intending to invest in an insurance company must have a relatively sound corporate governance structure and sound internal control and consolidated management systems, effective risk management, stable business operations, and not have committed a major violation of laws or regulations nor have had material operating risks during the most recent three years. It shall be ensured that the capital adequacy ratio of a commercial bank intending to invest in an insurance company complies with regulatory standards after deduction of the proposed investment amount. The board of directors of a commercial bank that intends to invest in an insurance company shall include persons familiar with insurance business operations and risk management.

Article 5: The insurance company in which a commercial bank intends to take an equity interest must have a good corporate governance structure, sound and effective risk management and good business development prospects, and its business and risk management indicators shall satisfy regulatory requirements in respect of the insurance business.

Article 6: The CBRC shall be responsible for reviewing the plan for the investment by a commercial bank in an insurance company and issuing in accordance with the law a regulatory opinion on the investment by the commercial bank in the insurance company.

Article 7: A commercial bank intending to invest in an insurance company shall submit an application to the CBRC in accordance with CBRC provisions on administrative permissions. When submitting the application, it shall submit the following documents and information in duplicate:

(1) an application letter;

(2) the resolution of its shareholders' general meeting or board of directors consenting to the investment in the insurance company;

(3) the resolution of the shareholders' general meeting or board of directors of the insurance company in which it intends to take an equity interest consenting to accepting the investment from it;

(4) the equity investment intent agreement;

(5) a feasibility study report;

(6) its audited financial accounting reports and business development reports for the most recent three years;

(7) audited financial accounting reports and business development reports for the most recent three years of the insurance company in which it intends to take an equity interest;

(8) the basic particulars of the insurance company in which it intends to take an equity interest and those of co-operating shareholders;

(9) the risk separation system, consolidated management system and implementing rules for affiliated transactions established/formulated by it and the insurance company in which it intends to take an equity interest; and

(10) other information that the CBRC requires be submitted.

Article 8: If the commercial bank is to  change the equity percentages of the insurance company in which it is to invest, it shall carry out the examination and approval procedures for the change in accordance with relevant CBRC provisions.

Part Three: Risk management

Section One: Corporate governance

Article 9: When a commercial bank invests and takes an equity interest in an insurance company, it shall strictly comply with provisions on the separation of businesses of institutions with legal personality. The board of directors of the commercial bank shall be responsible for establishing and continually enhancing a firewall system between it and the insurance company in which it has invested so as to ensure effective separation between them in areas such as corporate governance, business decision-making, business operations, risk control, personnel management, financial management, information management system and business premises.

The board of directors of the commercial bank shall designate one non-executive director responsible for monitoring, management and review of the firewall and affiliated transactions. Such director shall issue written opinions on the implementation of the firewall system, the business operations and risk position of the insurance company and the fairness and control of affiliated transactions at least once each year.

Article 10: The remuneration and  employment contract relationship with the commercial bank of the senior management personnel (including but not limited to the general manager, deputy general manager, chief financial officer, etc.) and business personnel assigned by it to the insurance company in which it has taken an equity interest must be severed and such persons may not hold concurrent positions in both institutions.

Section Two: Affiliated transactions

Article 11: Unless otherwise provided by the CBRC, a commercial bank may not provide any manner of on or off-balance sheet credit to the insurance company in which it has taken an equity interest or the insurance company's affiliates.

A commercial bank may not provide credit to customers secured by the insurance company in which it has taken an equity interest or by the insurance company's affiliates.

Article 12: A commercial bank may not  set as a precondition for providing bank services to a customer that the customer must have purchased insurance products sold by the insurance company in which it has taken an equity interest.

If a commercial bank accepts insurance policies of the insurance company in which it has taken an equity interest as a pledge for the provision of credit, the conditions thereof may not be more favourable than those for similar transactions with unaffiliated third parties.

Article 13: A commercial bank may not directly or indirectly sell to the insurance company in which it has taken an equity interest subordinated bonds that it has issued.

The quantity of the other security issued by the commercial bank and the affiliated parties controlled by it directly or indirectly held by the insurance company in which it has taken an equity interest may not exceed 10% of the total of such outstanding security. When a commercial bank and the affiliated parties controlled by it underwrite securities, the quantity sold to the insurance company in which it has taken an equity interest may not exceed 10% of the total quantity underwritten.

Section Three: Consolidated management

Article 14: A commercial bank shall establish/formulate policies, systems, duties and procedures for consolidated management in respect of the insurance company in which it has taken an equity interest in accordance with the Guidelines for the Consolidated Supervision of Banks (Trial Implementation) of the CBRC so as to carry out effective consolidated management.

Article 15: A commercial bank shall incorporate the insurance company in which it has taken an equity interest into its centralised information management system, and centrally monitor and manage the risk exposure of the insurance company.

Article 16: When calculating its capital adequacy ratio, a commercial bank shall deduct from its capital the entire amount of its capital investment in the insurance company.

Section Four: Business co-operation

Article 17: If a commercial bank and the insurance company in which it has taken an equity interest co-operate in business, they shall strictly comply with the provisions for the administration of various items of business of the CBRC and the insurance regulatory department, comply with fair market transaction principles and may not engage in acts of unfair competition.

 Article 18: The sales personnel of the insurance company in which a commercial bank has taken an equity interest may not engage in marketing in the business area of the shareholder bank.

A commercial bank shall establish a system of visible employee identification for its insurance agency sales personnel and duly carry out the training of such persons so as to ensure that they compliantly and prudently sell insurance products.

Article 19: The name and various logos of the shareholder bank may not be used on the insurance policies and publicity materials printed by an insurance company in which a commercial bank has taken an equity interest.

 Article 20: A commercial bank shall strictly comply with relevant provisions on the confidentiality of customer information. If a commercial bank and the insurance company in which it has taken an equity interest wish to provide customer information and data to each other, they must have the consent of the customer, and their mutual business transactions may not harm the lawful rights and interests of customers.

Part Four: Oversight

Article 21: The CBRC shall oversee the pilot projects for the investment by commercial banks in the equity of insurance companies within its regulatory purview as specified in laws and regulations and based on relevant regulatory co-operation mechanisms.

Article 22: The CBRC shall carry out, in accordance with the law, consolidated supervision of commercial banks that invest and take an equity interest in insurance companies.

 Article 23: The CBRC shall circulate material regulatory information in a timely manner based on the relevant regulatory information sharing mechanism so as to effectively guard against and mitigate various risks.

 Article 24: Commercial banks that invest and take an equity interest in insurance companies shall disclose information in accordance with relevant CBRC provisions. If a listed company is involved, the rules for the disclosure of information by listed companies shall be complied with.

Part Five: Supplementary provisions

Article 25: The CBRC shall be responsible for interpreting these Measures.

Article 26: These Measures shall be effective as of the date of issuance.