Notice of China Banking Regulatory Commission on Printing and Distributing the "Guidelines on Due Diligence in the Credit Extension Work of Commercial Banks"
Notice of China Banking Regulatory Commission on Printing and Distributing the "Guidelines on Due Diligence in the Credit Extension Work of Commercial Banks"
Notice of China Banking Regulatory Commission on Printing and Distributing the "Guidelines on Due Diligence in the Credit Extension Work of Commercial Banks"
Yin Jian Fa [2004] No. 51
July 16, 2004
All banking regulatory bureaus, all wholly state-owned commercial banks, and joint-stock commercial banks:
We have printed the "Guidelines on Due Diligence in the Credit Extension Work of Commercial Banks" and hereby distribute them to you. Please comply with and implement them.
All banking regulatory bureaus are requested to transmit the present Notice to all urban commercial banks, urban credit cooperatives, rural commercial banks, rural cooperative banks, and county-level united offices of rural credit cooperatives within their respective jurisdictions.
Appendix: Guidelines on Due Diligence in the Credit Extension Work of Commercial Banks
Chapter I General Provisions
Article 1 The present Guidelines are formulated in accordance with the "Law of the People's Republic of China on Commercial Banks", the "Law of the People's Republic of China on Banking Regulation", the "General Rules on Loans" and other laws and regulations for the purpose of promoting the prudential business operation of commercial banks, further improving the credit extension work mechanism, regulating the management of extended credits, and clarifying the requirements on due diligence in the credit extension work.
Article 2 The term credit extension as mentioned in the present Guidelines shall refer to the on-balance-sheet and off-balance-sheet credit extension to non-natural person customers. The on-balance-sheet credit extension includes loans, project financing, trade financing, discount, overdraft, tally, inter-bank lending and repurchase, etc.; while the off-balance-sheet credit extension includes loan commitment, suretyship, letter of credit, and acceptance of instruments, etc.
Credit extension may be divided by term into short-term credit extension and medium and long-term credit extension. The short-term credit extension shall refer to the credit extension of not more than one year, while the medium and long-term credit extension shall refer to the credit extension of more than one year.
Article 3 In the present Guidelines, such expressions as credit extension work, credit extension staff, due diligence in the credit extension work, and due diligence investigation of the credit extension work shall have their respective meanings as follows:
1. The expression credit extension work shall refer to the various credit extension business activities of commercial banks, including customer investigation, handling of the business, analysis and appraisal, credit extension decision making and implementation, post-credit-extension management, and management of problematic credits.
2. The expression credit extension staff shall refer to the relevant employees of commercial banks who participate in the credit extension work.
3. The expression due diligence in the credit extension work shall mean that the credit extension staff of a commercial bank have fulfilled the basic due diligence requirements in accordance with the present Guidelines.
4. The expression due diligence investigation of the credit extension work shall refer to the independent verification, appraisal and report made by the due diligence investigators of the credit extension work of the head office or branch of a commercial bank about the credit extension staff.
Article 4 With respect to the customer credit extension business for which an associated party as prescribed in the "Law of the People's Republic of China on Commercial Banks" applies, the credit extension staff shall apply for withdrawal.
Article 5 A commercial bank shall establish a strict system for vertical management of credit extension risks, and manage the credit extension in a uniform way.
Article 6 A commercial bank shall establish entire credit extension policies, decision making mechanism, management information system and uniform credit extension operation procedures, clarify the requirements on due diligence, as well as assess and amend the rules on credit extension business in time at regular intervals or when the relevant laws or regulations are changed.
Article 7 A commercial bank shall create a good credit extension work environment, clarify the requirements on credit extension risk control to the credit extension staff in various effective methods and ways, so that they may be familiar with the credit extension work duties and the due diligence requirements, continuously enhance their capacity in the credit extension work, and perform their duties independently.
Article 8 A commercial bank shall strengthen its management of the credit extension archives, record the rights, obligations, covenants, various forms of transactions, and breach and correction action between the borrower and the lender, and shall keep them properly.
Article 9 A commercial bank shall establish a responsibility system for due diligence in the credit extension work, clarify the duties of each credit extension department and position, ascertain the liabilities for the credit extension risks caused due to violation of any law or rule, and punish the relevant persons held liable in accordance with the legal provisions.
Article 10 The "Appendix" of the present Guidelines enumerates the relevant risk reminders, and each commercial bank shall formulate relevant risk prevention requirements in light of the actual situation and with reference to those reminders.
Chapter II Customer Investigation and Due Diligence Requirements for Handling the Business
Article 11 A commercial bank shall, according to the business development planning and risk strategy it has determined, draft clear targeted customers, including the customers with whom it has established business relations and the potential customers.
Article 12 A commercial bank shall, when determining targeted customers, clarify the features of the expected customers, and determine the basic requirements for the customers whose business may be accepted. All customers whose business is accepted by the commercial bank must generally satisfy or be higher than these requirements.
Article 13 A commercial bank shall, in its customer investigation, collect the basic information of customers and establish customer archives according to the credit extension types. For information list reminder, please see the "Reminder of Basic Information of Customers" in the "Appendix".
Article 14 A commercial bank shall pay attention to and collect the relevant information on group customers and associated customers, and effectively identify the centralized credit extension risks and the associated customers' credit extension risks.
Article 15 A commercial bank shall carefully verify the legality, authenticity and validity of the identity certificate provided by the customer, the qualification as a credit receiver, its financial conditions, etc., and shall record the process and result of verification in writing.
Article 16 A commercial bank shall investigate customers and verify the customer information mainly by on-site investigation, with indirect investigation as the supplement. When necessary, it may verify the authenticity of the customer information via an external credit institution.
Article 17 A commercial bank shall, according to the specific circumstance and on its own initiative, ask for relevant information from the relevant government departments and public intermediary institutions, so as to verify the authenticity of the materials provided by customers, and keep such information in archives.
Article 18 Where the customer information is changed in any way, the commercial bank shall require the customer to provide a written report, and record the information anew in archives after further verification.
Article 19 When supplementing or modifying customer information, the credit extension staff shall communicate with each other on their own initiative, and guarantee that each party be able to get the relevant information in time.
When a credit extension staff member either of the credit extension department or of a credit extension management department needs to make supplements to the customer information, he must notify the opposite party, provided that the matter shall generally be handled by the former.
Article 20 A commercial bank shall know about and grasp the management conditions of the customers, urge them to continuously increase management benefits, and guarantee the credit extension safety.
Article 21 When a customer meets with an emergent incident, the commercial bank shall immediately send persons to make an on-site investigation, who shall legally and timely render their opinions on whether to modify the original credit extension information or not.
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