Circular of the China Insurance Regulatory Commission and the State Administration of Foreign Exchange on Regulating the Matters Relating to the Operation of Overseas Loan under Domestic Guarantee Conducted by Insurance Institutions

Circular of the China Insurance Regulatory Commission and the State Administration of Foreign Exchange on Regulating the Matters Relating to the Operation of Overseas Loan under Domestic Guarantee Conducted by Insurance Institutions
Circular of the China Insurance Regulatory Commission and the State Administration of Foreign Exchange on Regulating the Matters Relating to the Operation of Overseas Loan under Domestic Guarantee Conducted by Insurance Institutions

Bao Jian Fa [2018] No.5

January 5, 2018

All insurance group (holding) companies, insurance companies, insurance asset management companies, and relevant custodian institutions,

In order to regulate the operation of overseas loan under domestic guarantee conducted by insurance group (holding) companies and insurance companies ("insurance institutions"), strengthen the regulation of overseas financing, and guard against overseas financing risks, pursuant to the Interim Administrative Measures for the Use of Insurance Funds, the Interim Administrative Measures for the Overseas Investment of Insurance Funds and the Implementing Rules for the Interim Administrative Measures for the Overseas Investment of Insurance Funds, as well as the Regulations on Foreign Exchange Administration of Cross-Border Guarantee issued by the State Administration of Foreign Exchange ("SAFE"), the relevant matters are hereby notified as follows:

I. For the purpose of this Circular, the "borrowing of overseas loan under domestic guarantee" refers to the financing behavior of borrowing from an overseas bank by the special-purpose company of an insurance institution backed by a letter of guarantee, a standby letter of credit, or other guarantee provided by a domestic bank as applied by the insurance institution or directly provided by the insurance group (holding) company (hereinafter referred to as the "OLDG operation").
For the purpose of this Circular, "a special-purpose company" refers to an overseas company directly established by, or indirectly controlled with 95% or more of its share held by, an insurance institution with its legitimate holdings of domestic or/and overseas assets or rights and interests for the purposes of overseas investment and financing.

II. Where insurance group (holding) companies conduct the OLDG operation, the counter guarantee may be provided by the insurance group (holding) companies to domestic banks. Where insurance companies conduct the OLDG operation, the counter guarantee may be provided by the insurance companies through their affiliated insurance group (holding) companies to domestic banks.

III. Insurance group (holding) companies may provide the guarantee or counter guarantee in the form of a warranty guarantee or a mortgage (pledge) of assets. In the case of a mortgage (pledge) of assets, the assets mortgaged or pledged shall be obtained from capital fund, capital reserve, undistributed profit or other self-owned funds.

IV. Insurance institutions shall, on the basis of the principle of asset and liability matching/management, and by taking into overall consideration the liquidity of their asset portfolios, the level of interest rates and exchange rates as well as the future change tendencies in the international financial market, financing costs, revenue and other factors, conduct the OLDG operation with prudence, improve their risk-control mechanism, and regulate their operational procedures, in order to effectively guard against the related risks.
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