The Operations Office of the People's Bank of China ("PBC") has recently enacted and issued the Interim Measures for Handling of Violations Related to Deposit Reserves (Draft for Comment) (the "Draft for Comment") to seek public comments by August 5, 2019.
The Draft for Comment gives the definitions of certain terms, including "banking financial institution", "non-banking financial institution", "deposit reserve", "violations related to deposit reserves" and "deposit reserves in arrears by financial institutions", in the first place, and then sets out four types of penalties financial institutions will face if they are in arrears with their deposit reserves. For instance, if a financial institution falls into arrears with its deposit reserves for the first time within a two-year period but the amount in arrears that should not be higher than 3% of the reserve base is paid in time later, it will not be punished provided that the arrearage falls under the circumstance that "the violation is minor and has been rectified in time, without causing any harmful consequences", as stipulated in Paragraph 2 of Article 27 of the Law on Administrative Penalties, and instead, the regulator will urge this financial institution, by means of regulatory talks and warning letters, to step up its deposit reserve management. Furthermore, the Draft for Comment provides for some other matters, including how to determine whether the amount in arrears is paid in time and how to calculate the amount in arrears.