Provisional Regulations of the PRC on the Control of Banks

Provisional Regulations of the PRC on the Control of Banks

Guo Fa [1986] No.1

January 7, 1986

CHAPTER I GENERAL PROVISIONS

Article 1 These Regulations are formulated in order to strengthen control over banks and other financial institutions, ensure the healthy development of financial services and promote the establishment of socialist modernisation.

Article 2 All banks and other financial institutions carrying on business such as deposits, loans, personal savings, discounting of bills, foreign exchange, settlement of accounts, trusts, investments, financial leasing and floating of securities, shall comply with the provisions of these Regulations.

Article 3 The central bank, specialised banks, and other financial institutions shall conscientiously and thoroughly carry out national financial policies. All their financial activities shall be directed towards developing the economy, stabilising the currency, and increasing the economic benefits of socialism.

Article 4 Institutions other than financial institutions are prohibited from carrying on financial business.

CHAPTER II THE CENTRAL BANK

Article 5 The People's Bank of China is the State organ through which the State Council leads and controls the fiscal affairs of the nation, and is the central bank of the State, and shall carry out in full the following duties:
(1) Research and draw up national guidelines and policies for financial activities, and arrange for their implementation after approval;
(2) Research and draw up draft financial legislation;
(3) Formulate the basic regulations for financial business;
(4) Control the issuing of currency,regulate currency circulation, and maintain currency stability;
(5) Control interest rates on deposits and loans, and set the rate of exchange between renminbi and foreign currencies;
(6) Devise State credit plans, exercise centralised control over credit funds, and exercise uniform control over the working capital of State enterprises;
(7) Control foreign exchange,bullion, and the State foreign exchange and gold reserves;
(8) Examine and approve the establishment and dismantling and merger of specialised banks and financial agencies;
(9) Lead, control,co-ordinate, supervise,and inspect the operations of specialised banks and other financial institutions;
(10) manage the State Treasury, and issue government bonds on its behalf;
(11) Control the shares, bonds and other securities of enterprises, and control the money market;
(12) Engage in relevant international financial activities on behalf of the government.

Article 6 In accordance with the provisions of the State laws and administrative regulations, the People's Bank of China shall control the State's insurance enterprises.

Article 7 The People's Bank of China shall establish a council to be the principal policy-making body of the head office. The principal functions of the council shall be as follows:
(1) To examine and consider financial guidelines and policy;
(2) To examine and consider important matters relating to annual State credit plans, cash plans and foreign exchange plans;
(3) To define principles for the establishment, dismantling and merger and the allocation of functions among specialised banks and financial institutions;
(4) To investigate other important matters concerning the overall financial situation.

Article 8 The People's Bank of China shall establish branches and sub-branches in accordance with the requirements of economic development.
Each branch and sub-branch of the People's Bank of China shall carry out duties relevant to the People's Bank of China in its area of jurisdiction, exercising leadership and control over financial affairs in that area of jurisdiction.

Article 9 The People's Bank of China shall provide services to specialised banks and other financial institutions in such areas as allocation of funds, co-ordination of functions, provision of information, development and training of personnel and assist in the development of their operating capacity.

Article 10 The head office and branches and sub-branches of the People's Bank of China shall be responsible for conciliation and arbitration in any business disputes occurring between specialised banks and other financial institutions.

Article 11 The People's Bank of China shall not directly accept deposits from or provide loans to enterprises or individuals.

CHAPTER III SPECIALISED BANKS

Article 12 In accordance with the requirements of national economic development, the State shall establish a number of specialised banks. Each specialised bank shall, according to its specified scope of business, operate deposits, loans, settlement of accounts, personal savings deposits, etc., in national and foreign currencies.

Article 13 All specialised banks shall be independently accountable economic entities and shall independently exercise their official powers and engage in business activities in accordance with the provisions of the State laws and regulations.

Article 14 Specialised banks shall carry out the following basic duties:
(1) Formulate specific operational systems and procedures in accordance with the basic regulations for financial business;
(2) Make decisions on loans to enterprises in accordance with State policy and State plans;
(3) Vary interest rates within prescribed limits;
(4) Be responsible for movement of funds within their own systems;
(5) Carry out supervision of credit and supervision of settlements of accounts;
(6) Exercise cash control in regard to account-holding units, in accordance with State provisions;
(7) Carry out supervision of pay-roll funds of account-holding units, in accordance with State regulations;
(8) Subject to authorisation by the People's Bank of China, control the working capital of State enterprises;
(9) In accordance with regulations, hold and dispose of retained profits;
(10) With the approval of the State Council or the head office of the People's Bank of China, engage in relevant international financial business activities.

Article 15 Branches and sub-branches established by specialised banks shall comply with the following requirements:
(1) They shall accord precisely with the requirements of economic development, and shall have operational capacity commensurate with their scale;
(2) They shall conform with the limits of their allocated scope of business;
(3) They shall have personnel qualified in financial operations and administration;
(4) They shall conform with economic accounting principles.
Head offices of specialised banks shall exercise vertical leadership over subordinate branches and sub-branches.

Article 16 Head offices of specialised banks shall submit the following matters to the head office of the People's Bank of China for examination and approval:
(1) Matters of business guidelines and policy falling within the scope of Article 5, paragraph one, item (1) of these Regulations;
(2) Matters outside the allocated scope of business;
(3) Codes of business regulations falling outside current basic regulations for financial business, or involving other specialised banks, requiring uniform regulations;
(4) Formulation and amendment of articles of association;
(5) Establishment of branches abroad.
Items in the above paragraphs falling outside the scope of responsibility and jurisdiction of the central bank as prescribed in these Regulations shall all be submitted by the head office of the People's Bank of China to the State Council for examination and approval.

Article 17 The following matters pertaining to branches and sub-branches of specialised banks shall be submitted to provincial branches of the People's Bank of China for examination and approval:
(1) Important business regulations formulated in the light of specific conditions in local areas of jurisdiction;
(2) Major changes in the channelling of credit funds;
(3) Matters involving other specialised banks in the same area of jurisdiction, requiring a uniformly prescribed system of business regulations.

Article 18 Specialised banks shall, in accordance with provisions, provide the People's Bank of China with reports on the performance of credit plans, statistical reports, financial reports, and operational reports.

Article 19 The establishment of specialised bank branches and sub-branches shall be approved respectively in accordance with the following provisions:
(1) Head offices, to be reviewed by the head office of the People's Bank of China, and approved by the State Council;
(2) Provincial branches, applications to be submitted by head offices of specialised banks to the head office of the People's Bank of China for approval;
(3) Local and municipal central sub-branches, and county branches, applications to be submitted by provincial bank branches to provincial branches of the People's Bank of China for approval;
(4) Operational units below the county branch level,applications to be submitted by district and municipal central sub-branches of specialised banks to local and municipal branches of the People's Bank of China for approval.

Article 20 Head offices of specialised banks and branches, sub-branches and offices of specialised banks that have been approved for establishment shall be issued with a "Permit to Carry on Financial Business" by the head office and branch offices respectively of the People's Bank of China, and in addition, in accordance with the provisions of the "Regulations on the Control of Registration of Industrial and Commercial Enterprises", shall carry out registration procedures and obtain a business licence before commencing business.

Article 21 When specialised bank branches, sub-branches and offices that have been established with approval need to relinquish their licence, they shall submit an application to the original approving unit two months prior to closure of business.
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