People's Bank of China, China Banking Regulatory Commission, China Securities Regulatory Commission, China Insurance Regulatory Commission and State Administration of Foreign Exchange, Circular on Regulating Interbank Businesses of Financial Institutions

A financial institution shall reasonably allocate the source and application of funds for its interbank businesses, place its interbank businesses within its liquidity management framework, strengthen its management of mismatched terms and duly control liquidity risks (Article 10).

The term for interbank borrowing may not exceed three years and that for other interbank financing may not exceed one year. Once the term expires, it may not be renewed (Article 13). The net amount of interbank outward financing proceeds, excluding settlement type interbank deposits, to any one financial institution with legal personality from a commercial bank, minus assets with a risk-weighting of zero, may not exceed 50% of the bank's Tier 1 capital. The balance of the interbank inward financing proceeds of a commercial bank may not exceed one-third of its total liabilities. The foregoing shall not apply to the provincial cooperatives of rural credit cooperatives, second level legal person cooperatives within a province and rural banks (Article 14).

Issued: April 24 2014
Effective: as of date of issuance

Applicability: For the purposes of this Circular, the term “interbank businesses” means various types of businesses, with investment and financing at their core, engaged in between financial institutions lawfully established in China, with the main business types including interbank borrowing, interbank deposits, interbank loans, interbank payment, repos (reverse repos) and other such interbank financing businesses and interbank investment businesses (Article 1).

The financial assets under repo (reverse repo) business shall be bankers' acceptance bills, bonds, central bank notes and other such financing assets of reasonable and fair value and relatively liquid that are traded on the interbank market and stock exchanges (Article 5).

A financial institution that engages in repo (reverse repo) and interbank investment business may not accept or offer any manner of direct or indirect, explicit or implicit credit security provided by third party financial institutions, unless otherwise specified by the state (Article 7).

A financial institution shall reasonably allocate the source and application of funds for its interbank businesses, place its interbank businesses within its liquidity management framework, strengthen its management of mismatched terms and duly control liquidity risks (Article 10).

The term for interbank borrowing may not exceed three years and that for other interbank financing may not exceed one year. Once the term expires, it may not be renewed (Article 13). The net amount of interbank outward financing proceeds, excluding settlement type interbank deposits, to any one financial institution with legal personality from a commercial bank, minus assets with a risk-weighting of zero, may not exceed 50% of the bank's Tier 1 capital. The balance of the interbank inward financing proceeds of a commercial bank may not exceed one-third of its total liabilities. The foregoing shall not apply to the provincial cooperatives of rural credit cooperatives, second level legal person cooperatives within a province and rural banks (Article 14).