General Offices of the China Banking and Insurance Regulatory Commission, Ministry of Housing and Urban-Rural Development and People's Bank of China, Circular on the Work Associated with the Issuance by Commercial Banks of Letters of Guarantee in Exchange for Pre-Sale Escrow Funds

Issued: November 12, 2022

Main contents: Based on the principles of market orientation and rule of law, commercial banks are permitted to decide at their own discretion on the basis of a full assessment of real estate enterprises' credit risk, financial position, reputation risk, etc. to engage in the business of letter of guarantee in exchange for pre-sale escrow funds with high-quality real estate enterprises (Article 1).

Once a real estate enterprise opens a pre-sale fund escrow account, all pre-sale funds for commercially developed premises, such as the deposits and down payments paid by premises buyers, mortgage loans extended by commercial banks and other manner of premises purchase funds shall be deposited directly into the escrow account. Once the funds in an escrow account reach the escrow limit specified by the housing and urban-rural construction authority, the real estate enterprise may apply to a commercial bank for the issuance of a letter of guarantee in exchange for funds falling within the escrow limit. The amount exchanged for with the letter of guarantee may not exceed 30% of the amount of funds in the escrow account required to ensure completion and delivery of the project. The funds in escrow after the exchange may not be less than 70% of the amount of funds in the escrow account required to ensure completion and delivery of the project (Article 2).