2004/08/26

Issued: July 26, 2004

Effective: September 1, 2004

Issuing Authority: China Banking Regulatory Commission (CBRC)

In addition to changing the name of "People's Bank of China" into "China Banking Regulatory Commission," the Rules provide for the following substantial changes:

First, the Rules repeal the requirements that were provided for in the previous Rules, i.e. that a foreign bank cannot open more than one branch per year; and any foreign-funded financial institution whose application has been rejected must wait at least one year to submit another application. They also significantly relax minimum and operating capital requirements for both the Chinese branches of foreign banks providing RMB services to Chinese enterprises and individuals, and Chinese branches of wholly foreign-owned banks and Sino-foreign joint-venture banks.

Second, the Rules make three adjustments to the application process: 1) application documents for opening a foreign bank branch or subsidiary may now be submitted directly to the CBRC headquarters with a copy sent to the corresponding local CBRC office; 2) application documents from a foreign-funded financial institution for undertakings subject to regulatory approval must first be submitted to the corresponding local CBRC office for preliminary review and then submitted directly to the CBRC headquarters for final approval; and 3) local CBRC offices are delegated the power of reviewing and approving the qualifications of the board members and senior executives of foreign banks.

Third, the Rules feature some risk-focused and prudential supervisory requirements as well as some non-administrative supervisory measures. In line with international supervisory practices, the Rules also require special supervisory actions to be taken to address the non-prudent behaviour of foreign-funded financial institutions.

Lastly, in order to fulfil China's WTO commitments, the Rules embody certain requirements that level the playing field for domestic and foreign financial institutions.