Legislation roundup: Foreign-owned banks and property insurance rules

Banking

China Banking Regulatory Commission, Implementing Measures for Administrative Permission Items of Foreign-funded Banks
中国银监会外资银行行政许可事项实施办法

Among the conditions for the establishment of wholly foreign-owned banks and Sino-foreign equity joint venture banks, their minimum registered capital is increased from the existing equivalent to Rmb300 million in a freely convertible currency to Rmb1 billion or the equivalent in a freely convertible currency. Furthermore, the Measures eliminate the requirement that the sole or controlling shareholder in a wholly foreign-owned bank or the sole or principal foreign shareholder in a Sino-foreign equity joint venture bank has a capital adequacy ratio of not less than 8%. Instead, such shareholder shall have a capital adequacy ratio complying with the provisions of the financial regulator of its residing country or region and the China Banking Regulatory Commission.

The Measures observe the principle of consistency in the regulatory criteria for Chinese and foreign-funded banks, maintaining in terms of permission conditions and procedures consistency with those for Chinese-invested banks to the greatest extent possible. The item most worthy of attention is the abolition of the provision in the old Measures concerning the establishment of sub-branches in the same city, which stated that “an applicant may, in a city, only apply once to establish one sub-branch in the same city”. The Measures additionally abolish the provision requiring a sub-branch to have operating capital of not less than Rmb10 million or the equivalent in a freely convertible currency.

See the digest for more details.

Further reading
PRC Regulations for the Administration of Foreign-invested Banks (2nd Revision)
Implementing Rules for the PRC Regulations for the Administration of Foreign-invested Banks


Insurance

China Insurance Regulatory Commission, Circular on Matters Relevant to Strengthening the Administration of Assumption Reinsurance Business of Property Insurance Companies
中国保险监督管理委员会关于加强财产保险公司再保险分入业务管理有关事项的通知

Property insurance companies are required to establish a complete assumption reinsurance management system, which:

1. clearly identifies factors that need to be considered when determining the underwriting capability and specifies the maximum reserve amount or underwriting proportion for each risk unit of each product line;
2. prudently assesses risks and establishes a risk control mechanism incorporating underwriting and claims reviews as well as a hierarchical authorisation system; and
3. effectively spreads risks and formulates methods to spread risks of the assumption reinsurance business.

See the digest for more details.

Further reading
Circular on Issues Relevant to Reinsurance Business Safety
Provisions for the Administration of the Reinsurance Business
Establishment of Reinsurance Companies Provisions