Implementing Measures of the China Banking Regulatory Commission for Administrative Licensing Matters concerning Foreign-funded Banks

Implementing Measures of the China Banking Regulatory Commission for Administrative Licensing Matters concerning Foreign-funded Banks

Order of the China Banking Regulatory Commission [2014] No.6

September 11, 2014

The Implementing Measures of the China Banking Regulatory Commission for Administrative Licensing Matters concerning Foreign-funded Banks, adopted at the chairman meeting of the China Banking Regulatory Commission, are hereby promulgated for implementation as of the date of promulgation.

Chairman Shang Fulin

Implementing Measures of the China Banking Regulatory Commission for Administrative Licensing Matters concerning Foreign-funded Banks

Chapter I General Provisions

Article 1 To regulate the administrative licensing by the China Banking Regulatory Commission (hereinafter referred to as the "CBRC") and its dispatched offices for foreign-funded banks, specify administrative licensing in terms of matters, requirements, procedures and time limit, and protect applicants' legitimate rights and interests, the Implementing Measures of the China Banking Regulatory Commission for Administrative Licensing Matters concerning Foreign-funded Banks (hereinafter referred to as the "Measures") are enacted in accordance with the Banking Regulation Law of the People's Republic of China, the Law of the People's Republic of China on Commercial Banks, the Administrative Licensing Law of the People's Republic of China, the Administrative Regulations of the People's Republic of China on Foreign-invested Banks and other laws, administrative regulations and the relevant decisions of the State Council.

Article 2 For the purpose of the Measures, the term "foreign-funded bank" includes wholly foreign-funded banks, Sino-foreign equity joint banks as well as branches and representative offices of foreign banks. Wholly foreign-funded banks, Sino-foreign equity joint banks as well as branches of foreign banks are collectively referred to as foreign-funded banking business institutions. A representative office of a foreign bank refers to a banking representative office subject to the regulation of the CBRC.

Article 3 The CBRC and its dispatched offices shall conduct administrative licensing for foreign-funded banks in accordance with the Measures and the Provisions of the China Banking Regulatory Commission on the Procedures for the Implementation of Administrative Licensing.

Article 4 For a foreign-funded bank, the following matters shall be subject to administrative licensing by the CBRC and its dispatched offices: establishment, alteration and termination of an organization, scope of business, qualification of directors and senior executives, as well as other matters subject to administrative licensing in accordance with laws, administrative regulations and decisions of the State Council.

Article 5 For the purpose of the Measures, the prudence requirements shall include at least the following details:
1. have a favorable industrial reputation and public image;
2. have good results as a going concern and assets of good quality;
3. the management possesses good professional expertise and management capability;
4. have a sound risk management system that can effectively control various risks;
5. have a sound internal control system and an effective information management system;
6. the financial accounting reports are prepared under prudent accounting principles, and the accounting firm concerned has issued unqualified opinion for the financial accounting reports;
7. have no record of material breach of laws and regulations and no serious case resulting from internal management problems;
8. have an effective system for human resources management and possess high-quality professionals;
9. have the experience and capability to manage and support the activities of organization within the territory of China;
10. have an effective mechanism for capital restriction and capital supplementation;
11. have a sound corporate governance structure; and
12. satisfy other prudence requirements as provided by laws, administrative regulations and the CBRC.
Items 9, 10 and 11 hereof apply to wholly foreign-funded banks and their shareholders, Sino-foreign equity joint banks and their shareholders and foreign banks only.

Article 6 The name of a foreign-funded bank shall include a name in Chinese and that in a foreign language. The Chinese name of a branch or representative office of a foreign bank shall indicate the foreign bank's nationality and liability form. The nationality shall be based on the place where the foreign bank has been registered. If the foreign bank's name has contained its nationality, the nationality requirements may be ignored. For a foreign bank of which the liability form is unlimited liability, the requirements for liability form in its Chinese name may be ignored. For branches established in mainland China by banks from Hong Kong, Macau or Taiwan region, only liability form is required to be indicated in their Chinese names.

Article 7 Where the documents submitted in accordance herewith, except for annual reports, are written in a foreign language, their Chinese translation shall be attached thereto. And annual reports printed in a language other than Chinese or English shall be accompanied by a Chinese or English translation.
For the purpose of the Measures, annual reports shall be audited and accompanied by the audit opinion issued by an accounting firm recognized by the country or region where the applicant is located.

Article 8 For the documents to be submitted in accordance herewith, if the signature of an authorized person is required, the letter of authorization for the authorized person shall also be submitted together.
The photocopies of business license and financial business permit, letter of authorization and letter of guarantee for bearing the liability for taxes and debts of a branch within the territory of China by a foreign bank to be submitted in accordance herewith shall be notarized by an agency recognized by the country or region where the foreign bank is located and authenticated by the Chinese embassy or consulate stationed in that country; however, for photocopies of business license issued by Chinese administrative authorities for industry and commerce as well as notarization documents issued by notary agencies within the territory of China, no authentication is required.
The CBRC may, as the case may be, require other application documents submitted by an applicant to be notarized by an agency recognized by the country or region where the applicant is located and authenticated by the Chinese embassy or consulate stationed in that country.

Chapter II Establishment of Institutions

Section 1 Establishment of a Wholly Foreign-funded Bank or Sino-foreign Equity Joint Bank

Article 9 A proposed wholly foreign-funded bank or Sino-foreign equity joint bank shall satisfy the following requirements:
1. has articles of association as provided in the Company Law of the People's Republic of China, the Law of the People's Republic of China on Commercial Banks and the Administrative Regulations of the People's Republic of China on Foreign-invested Banks;
2. its registered capital shall have been paid in, with a minimum amount of CNY1 billion or the equivalent in a freely convertible currency;
3. possesses qualified directors and senior executives satisfying the requirements for appointment thereof and qualified practitioners who are familiar with banking business;
4. has a sound organizational structure and management system;
5. has a business premise, security precaution measures and other facilities appropriate for business operation; and
6. has an information technology framework in line with its business operation, a necessary, safe and compliant information technology system supporting its business operation, and technologies and measures to ensure the effective and safe running of the information technology system.

Article 10 A shareholder of a proposed wholly foreign-funded bank or Sino-foreign equity joint bank shall satisfy the following requirements:
1. has the capability of sustainable profitability, a favorable reputation, and no record of material violation of laws or regulations;
2. has an effective anti-money laundering system, with the exception of a Chinese shareholder which is a non-financial institution;
3. a foreign shareholder shall have experience in international finance activities, be subject to the effective regulation of financial regulatory authorities of the country or region where it is located, and shall have obtained the consent from the financial regulatory authorities of the country or region where it is located for its application; and
4. satisfies other prudence requirements as provided in Article 5 hereof.
The country or region where a shareholder of a proposed wholly foreign-funded bank or a foreign shareholder of a Sino-foreign equity joint bank is located shall have good economic conditions and a perfect financial regulatory system, and the financial regulatory authorities of such country or region shall have established a sound mechanism for cooperation with the CBRC in supervision and administration.

Article 11 Shareholders of a proposed wholly foreign-funded bank shall be financial institutions, and the sole or controlling shareholder of the said bank shall satisfy, in addition to the requirements as provided in Article 10 hereof, the following requirements:
1. it shall be a commercial bank;
2. it shall have established a representative office within the territory of China for more than two years, and in the case of a bank from Hong Kong, Macau or Taiwan region, it shall have established a representative office in mainland China for more than one year;
3. its total assets shall not be less than USD10 billion at the end of the year before its application for establishment, and in the case of a bank from Hong Kong, Macau or Taiwan region, its total assets shall not be less than USD6 billion at the end of the year before its application for establishment; and
4. its capital adequacy ratio shall satisfy the provision as provided by the financial regulatory authorities of the country or region where it is located and by the CBRC.

Article 12 The shareholders of a proposed Sino-foreign equity joint bank shall satisfy the requirements as provided in Article 10 hereof, and the foreign shareholders and the sole Chinese or principal shareholder shall be financial institutions, and the foreign sole or principal shareholder shall also satisfy the following requirements:
1. it shall be a commercial bank;
2. it shall have established a representative office within the territory of China; in the case of a bank from Hong Kong or Macau, such requirement may be ignored;
3. its total assets at the end of the year before its application for establishment shall not be less than USD10 billion; in the case of a bank from Hong Kong or Macau, such requirement is not less than USD6 billion; and
4. its capital adequacy ratio shall satisfy the requirements as provided by the financial regulatory authorities of the country or region where it is located and by the CBRC.

Article 13 A principal shareholder as referred to in Article 12 hereof refers to a commercial bank that holds more than 50% of the total capital or total shares of a proposed Sino-foreign equity joint bank, or does not hold more than 50% of the total capital or total shares of a proposed Sino-foreign equity joint bank but satisfies any of the following requirements:
1. holds more than half of voting power of the proposed Sino-foreign equity joint bank;
2. has the right to control financial and operating policies of the proposed Sino-foreign equity joint bank;
3. has the right to appoint and dismiss the majority of the board of directors or similar power body of the proposed Sino-foreign equity joint bank; and
4. has more than half of voting power of the board of directors or similar power body of the proposed Sino-foreign equity joint bank.
The principal shareholder of the proposed Sino-foreign equity joint bank shall incorporate the proposed Sino-foreign equity joint bank into its consolidated statements.

Article 14 One shall not be a shareholder of a proposed wholly foreign-funded bank or Sino-foreign equity joint bank under any of the following circumstances:
1. there are obvious defects in its corporate governance structure and mechanism;
2. its shareholding relations are complicated or lack transparency;
3. it has numbers of affiliated enterprises, with frequent or abnormal affiliated transactions;
4. its core business is less prominent or its business scope involves too many industries;
5. its cash flow fluctuation is frangible to the impact of economic status;
6. its debt-to-asset ratio and financial leverage ratio are higher than the average level in the sector;
7. it holds shares in the wholly foreign-funded bank or Sino-foreign equity joint bank on behalf of others; and
8. other circumstances that have significant adverse impacts on the proposed bank.

Article 15 To establish a wholly foreign-funded bank or Sino-foreign equity joint bank, there are two phases required: application for preparatory establishment and application for business commencement.

Article 16 An application for preparing the establishment of a wholly foreign-funded bank or Sino-foreign equity joint bank is subject to acceptance and preliminary examination by the local office of the CBRC at the place where the proposed institution is located, and then review and approval by the CBRC.
An applicant for preparing the establishment of a wholly foreign-funded bank or Sino-foreign equity joint bank shall submit application documents to the local office of the CBRC at the place where the proposed institution is located and, at the same time, send a copy thereof to the dispatched office of the CBRC at the place where the proposed institution is located.
The local office of the CBRC at the place where the proposed institution is located shall, within 20 days from the date of acceptance of the application, submit the application documents together with its examination opinion to the CBRC. Then the CBRC shall, within six months upon receipt of the complete application documents, render a decision of approval or disapproval for the application, and notify in writing the applicant of its decision. In case of a decision of disapproval, the reasons therefor shall be given. The CBRC may, in special cases, appropriately extend the period for review, and notify in writing the applicant thereof; however, the extension shall not exceed three months.

Article 17 An applicant for preparing the establishment of a wholly foreign-funded bank or Sino-foreign equity joint bank shall submit the following application documents (in duplicate) to the local office of the CBRC at the place where the proposed institution is located and, at the same time, send a copy thereof to the dispatched office of the CBRC at the place where the proposed institution is located:
1. a written application for preparatory establishment jointly signed by chairmen of the board of directors or presidents (chief executive officer or general manager) of all shareholders to the chairman of the CBRC, including the proposed institution's name, location, amount of registered capital, business types under the application, names of all shareholders and their ratio of contributions respectively;
2. feasibility study report, at least including the applicant's basic information, and market prospect analysis, business development planning, organizational and management structures, sizes of assets and liabilities and profit and loss forecasts for the future three years from the business commencement, and preliminary planning for building the information system, data center and network related to business operation in respect of the proposed institution;
3. draft articles of association of the proposed institution;
4. contract for equity joint venture signed by all shareholders of the proposed institution, which may be ignored in the case of a wholly foreign-funded bank with a sole shareholder;
5. articles of association of each shareholder of the proposed institution;
6. organizational charts of each shareholder of the proposed institution and of the group to which the shareholder is affiliated, list of principal shareholders, and list of overseas branches and affiliated enterprises;
7. annual reports of each shareholder of the proposed institution for the latest three years;
8. anti-money laundering system of each shareholder of the proposed institution, which may be ignored in case that the Chinese shareholder is a non-financial institution;
9. letter of guarantee signed by each shareholder of the proposed institution for business operation as a going concern within the territory of China and effective management over the proposed institution;
10. photocopies of the business license or financial business permit issued by the financial regulatory authorities of the country or region where the foreign shareholder of the proposed institution is located as well as the letter of opinions of such financial regulatory authorities on the application of the foreign shareholder;
11. for an application for the establishment of a wholly foreign-funded bank or Sino-foreign equity joint bank for the first time, information on the financial system and abstracts of the relevant financial regulatory laws and regulations of the country or region where the foreign shareholder is located are required; and
12. other documents as required by the CBRC.

Article 18 An applicant shall, within 15 days upon approval for the preparatory establishment, ask for an application form on business commencement from the dispatched office of the CBRC at the place where the proposed institution is located to commence its preparatory work within six months upon approval therefor.
In case of failure to complete the preparatory work within six months, the applicant shall report the case to the dispatched office of the CBRC at the place where the proposed institution is located one month before the expiration of the period for preparatory establishment for an extension of three months at most.
The applicant shall submit an application for business commencement before the expiration of the period as provided in the preceding paragraph; otherwise, the approval document will become invalid.

Article 19 Upon completing the preparatory work, the proposed wholly foreign-funded bank or Sino-foreign equity joint bank shall apply for an acceptance check to the local office of the CBRC at the place where the proposed institution is located and may, upon passing the acceptance check, apply for business commencement, which is subject to the acceptance and preliminary examination by the local office of the CBRC at the place where the proposed institution is located, and then review and approval by the CBRC.
To apply for business commencement, the proposed wholly foreign-funded bank or Sino-foreign equity joint bank shall submit application documents to the local office of the CBRC at the place where the proposed institution is located and, at the same time, send a copy thereof to the dispatched office of the CBRC at the place where the proposed institution is located.
The local office of the CBRC at the place where the proposed institution is located shall, within 20 days from the date of acceptance of the application, submit the application documents as well as its examination opinion to the CBRC. The CBRC shall, within two months upon receipt of the complete application documents, render a decision of approval or disapproval for business commencement, and notify in writing the applicant of the same. In case of a decision of disapproval, the reasons therefor shall be given.

Article 20 To apply for business commencement, the proposed wholly foreign-funded bank or Sino-foreign equity joint bank shall submit the letter of opinion on passing the acceptance check together with the following application documents (in duplicate) to the local office of the CBRC at the place where the proposed institution is located and, at the same time, send a copy thereof to the dispatched office of the CBRC at the place where the proposed institution is located:
1. a written application for business commencement signed by the person in charge of the preparatory group to the chairman of the CBRC, including the proposed institution's name, domicile, amount of registered capital and business scope, names of all shareholders and their shareholding ratios as well as names of the proposed chairman of the board and president (chief executive officer or general manager); in the case of a representative office established in the same city where the proposed wholly foreign-funded bank or Sino-foreign equity joint bank is located, an application for shutting down the representative office shall be submitted at the same time;
2. an application form on business commencement;
3. relevant documents as required for the review and approval of qualification of the proposed chairman of the board of directors and president (chief executive officer or general manager);
4. an audit report before business commencement and certificate of capital verification issued by a statutory capital verification institution;
5. organizational chart, description of each job, internal authorization and reporting route of the proposed institution;
6. name list, resumes and training records of the staff of the proposed institution;
7. draft articles of association of the proposed institution and the letter of legal opinion issued by a law firm lawfully incorporated within the territory of China on the draft articles of association;
8. photocopies of the acceptance certificates for the safety and fire prevention facilities in the business premise or the relevant certificates;
9. photocopies of the certificates of ownership or right to use, or lease contract in respect of the business premise; and
10. other documents as required by the CBRC.

Article 21 A wholly foreign-funded bank or Sino-foreign equity joint bank shall, upon receipt of the approval for business commencement and the financial business permit, register with the administrative authorities for industry and commerce for a business license.
The wholly foreign-funded bank or Sino-foreign equity joint bank shall commence business within six months after receiving the business license. In case of failure to commence business, it shall report the case one month before the expiration of the aforesaid period to the dispatched office of the CBRC at the place where it is located for an extension of three months at most.
In case that the wholly foreign-funded bank or the Sino-foreign equity joint bank fails to commence business within the aforesaid period as prescribed in the preceding paragraph, the original approval for business commencement will become invalid. The CBRC will de-register the approval for business commencement, take back the financial business permit, and make an announcement thereon.

Section 2 Restructuring a Branch of a Foreign Bank into a Wholly Foreign-funded Bank

Article 22 Where a foreign bank applies for restructuring its branch within the territory of China into a wholly foreign-funded bank solely contributed by itself, the applicant shall satisfy the requirements hereof for establishing a wholly foreign-funded bank, make a commitment to business operation as a going concern within the territory of China, and possess the capacity to effectively manage the proposed wholly foreign-funded bank.

Article 23 Where a foreign bank applies for restructuring its branch within the territory of China into a wholly foreign-funded bank solely contributed by itself, there are two phases required: application for restructuring preparation and application for business commencement.

Article 24 The application filed by a foreign bank for restructuring its branch within the territory of China into a wholly foreign-funded bank solely contributed by itself is subject to acceptance and preliminary examination by the local office of the CBRC at the place where the proposed institution is located, and then review and approval by the CBRC.
To apply for preparation for restructuring into a wholly foreign-funded bank, the applicant shall submit application documents to the local office of the CBRC at the place where the proposed institution is located and, at the same time, send a copy thereof to the dispatched offices of the CBRC at the places where all branches of the foreign bank within the territory of China are located respectively.
The local office of the CBRC at the place where the proposed institution is located shall, within 20 days from the date of acceptance of the application, submit the application documents together with its examination opinion to the CBRC. The CBRC shall, within six months upon receipt of the complete application documents, render a decision of approval or disapproval therefor, and notify in writing the applicant of the same. In case of a decision of disapproval, the reasons therefor shall be given. The CBRC may, in special cases, appropriately extend the review period, and notify in writing the applicant of the extension; however, the extension shall not exceed three months.

Article 25 To apply for preparation for restructuring into a wholly foreign-funded bank, the applicant shall submit the following application documents (in duplicate) to the local office of the CBRC at the place where the proposed institution is located and, at the same time, send a copy thereof to the dispatched offices of the CBRC at the places where all branches of the foreign bank are located (one copy to each office):
1. a written application signed by the chairman of the board or president (chief executive officer or general manager) of the applicant to the chairman of the CBRC, including the names, location, amount of registered capital or working capital of the proposed wholly foreign-funded bank and its branches, as well as the types of business to be developed under the application; in case of an application for increase of registered capital simultaneously, the amount of registered capital to be increased and the currency involved shall be stated;
2. feasibility study report and organizational restructure plan, at least including the applicant's basic information, and market prospect analysis, business development planning, organizational and management structures, sizes of assets and liabilities and profit and loss forecasts for the future three years from the business commencement, and preliminary planning for building the information system, data center and network related to business operation in respect of the proposed institution;
3. draft articles of associations of the proposed institution;
4. the resolution made by the board of directors of the applicant on restructuring its branch within the territory of China into a wholly foreign-funded bank solely contributed by itself;
5. letter of opinion signed by the chairman of the board of directors or the president (chief executive officer or general manager) of the applicant on consenting the succession of claims, debts and taxes of the original branch within the territory of China by the proposed wholly foreign-funded bank as well as the letter of guarantee signed by the chairman of the board of directors or the president (chief executive officer or general manager) of the applicant for bearing joint and several liability for the claims, debts and taxes of the original branch within the territory of China prior to the restructuring;
6. letter of guarantee signed by the chairman of directors or president (chief executive officer or general manager) of the applicant for business operation as a going concern and effective management over the proposed wholly foreign-funded bank, including allowing the proposed wholly foreign-funded bank to use its goodwill and supporting the proposed wholly foreign-funded bank in terms of capital, management and technology;
7. the consolidated financial accounting reports of all branches of the applicant within the territory of China for two years before the application;
8. letter of opinion of the financial regulatory authorities of the country or region where the applicant is located on the applicant's restructuring of the branch within the territory of China;
9. annual reports of the applicant for the latest three years; and
10. other materials as required by the CBRC.

Article 26 An applicant shall, within 15 days upon approval for the restructuring, ask for an application form on business commencement from the dispatched office of the CBRC at the place where the proposed wholly foreign-funded bank is located to start preparatory work. The preparatory period is six months from the date when the applicant receives the approval for the restructuring.
In case of failure to complete the preparatory work within six months, the applicant shall report the case to the dispatched office of the CBRC at the place where the proposed wholly foreign-funded bank is located one month before the expiration of the preparatory period, and send a copy thereof to the dispatched office of the CBRC at the place where the original branch of the foreign bank is located. The preparatory period is three months at most.
The applicant shall submit an application for business commencement before the expiration of the period as prescribed in the preceding paragraph; otherwise, the approval for restructuring will become invalid.

Article 27 The proposed wholly foreign-funded bank shall, upon completing the preparatory work, apply for an acceptance check to the local office of the CBRC at the place where the proposed institution is located and may, upon passing the acceptance check, apply for business commencement, which is subject to acceptance and preliminary examination by the local office of the CBRC at the place where the proposed institution is located, and then review and approval by the CBRC.
To apply for business commencement, the wholly foreign-funded bank restructured from a branch of a foreign bank within the territory of China shall submit application documents to the local office of the CBRC at the place where the proposed institution is located and, at the same time, send a copy thereof to the dispatched office of the CBRC at the place where the original branch of the foreign bank is located.
The local office of the CBRC at the place where the proposed institution is located shall, within 20 days from the date of acceptance of the application, submit the application documents together with its examination opinion to the CBRC. Then the CBRC shall, within two months upon receipt of the complete application documents, render a decision of approval or disapproval for business commencement, and notify in writing the applicant of the same. In case of a decision of disapproval, the reasons therefor shall be given.

Article 28 To apply for business commencement, the wholly foreign-funded bank restructured from a foreign bank's branch within the territory of China shall submit the letter of opinion on passing the acceptance check for business commencement together with the following application documents (in duplicate) to the local office of the CBRC at the place where the proposed institution is located and, at the same time, send a copy thereof to the dispatched office of the CBRC at the place where the foreign bank's original branch is located:
1. a written application for business commencement sighed by the person in charge of the preparatory group to the chairman of the CBRC, including the names, domiciles or business premises and registered capital of the proposed wholly foreign-funded bank and its branches, the working capital of its branches, business types under the application, and the names of the proposed chairman of the board of directors, president (chief executive officer or general manger) and heads of its branches and sub-branches;
2. list of assets, liabilities and owners' equity proposed to be transferred to the proposed wholly foreign-funded bank, the simulate balance sheet, income statement, table on five-grades classification of loan quality and the amount of loan loss reserves of the proposed wholly foreign-funded bank;
3. information on completion of the restructuring;
4. the letter of legal opinion on transfer of contracts issued by a law firm; for a contract unavailable for transfer, the letter of legal opinion on the emergency response plan formulated by the bank is required;
5. the audit report before business commencement and the certificate of capital verification issued by a statutory capital verification institution;
6. draft articles of association of the proposed wholly foreign-funded bank and the letter of legal opinion on the said draft issued by a law firm incorporated within the territory of China by law;
7. letter of guarantee signed by the chairman of board of directors or the president (chief executive officer or general manger) of the applicant for business operation as a going concern within the territory of China and effective management over the proposed wholly foreign-funded bank, including allowing the proposed wholly foreign-funded bank to use its goodwill, and supporting the proposed wholly foreign-funded bank in terms of capital, management and technology;
8. the organizational chart, description of each job, internal authorization and reporting route of the proposed wholly foreign-funded bank;
9.
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