(Adopted at the Sixth Session of the StandingCommittee of the Tenth National People’s Congress on December 27, 2003)
Chapter I General Provisions
Article 1 This law is enacted for the purpose ofimproving banking regulation and supervision, standardizing banking supervisoryprocess and procedures, preventing and mitigating financial risks in thebanking industry, protecting the interests of depositors and other customers,as well as promoting a safe and sound banking industry in China.
Article 2 The banking regulatory authorityunder the State Council shall be responsible for the regulation and supervisionof banking institutions in China and their business operations.
Banking institutions referred to in this law arefinancial institutions established within the territory of the People’sRepublic of China to take deposits from the general public,including, among others, commercial banks, urban and rural creditcooperatives , and policy banks.
Theprovisions of this law concerning the regulation and supervision of bankinginstitutions are applicable to the regulation and supervision of assetmanagement companies, trust and investment companies, finance companies,financial leasing companies and other financial institutions established withinthe territory of the People’s Republic of China following the approval ofthe banking regulatory authority under theState Council.
Thebanking regulatory authority under the State Council shall, in accordance withthe relevant provisions of this law, regulate and supervise the financialinstitutions established outside the People’s Republic of China following theapproval of the banking regulatory authority, as well as the overseas business operationsconducted by the financial institutions referred to in the two precedingparagraphs.
Article 3 The objective of bankingregulation and supervision is to promote a safe and sound banking industry andmaintain market confidence in the banking industry.
The banking regulation and supervision shall beinstrumental in protecting fair competition in the banking industry andenhancing the competitiveness of the banking industry.
Article 4 The banking regulatory authority shall exercisebanking regulation and supervision in accordance with laws and regulations andin line with the principles of openness, fairness and efficiency.
Article 5 The banking regulatory authorityand its staff shall be protected by law while performing supervisory responsibilitiesin accordance with laws and regulations, and be free from interference by localgovernments, government departments at various levels, public organizations orindividuals.
Article 6 The banking regulatory authorityunder the State Council shall establish mechanisms for sharing supervisory informationwith the People’s Bank of China and other financial regulatory authoritiesunder the State Council.
Article 7 The banking regulatory authorityunder the State Council may establish supervisory cooperation mechanisms withthe banking supervisory authorities in other countries and/or regions to ensureeffective supervision and regulation of cross-border banking activities.
Chapter II The BankingRegulatory Authority
Article 8 The banking regulatory authority under theState Council may, if deemed necessary for performing its responsibilities, setup local offices, and shall administer the activities of its localoffices.
Thelocal offices of the banking regulatory authority under the State Council shallperform supervisory and regulatory functions as authorized by the bankingregulatory authority under the State Council.
Article 9 The supervisory personnel of thebanking regulatory authority shall have the professional knowledge and workexperiences as required for performing their duties.
Article 10 The staff of the bankingregulatory authority shall perform their duties with due diligence and inaccordance with laws and regulations and be impartial and honest. They shallnot take advantage of their positions to seek illegal gains, or concurrentlyhold a position in enterprises including financial institutions.
Article 11 The staff of thebanking regulatory authority shall not reveal the information that deemedconfidential by the government, or by the banking institutions under thesupervision of the banking regulatory authority, or by other parties concerned.
The banking regulatory authority under the StateCouncil shall make relevant arrangements for preserving the confidentiality ofinformation in the process of exchanging supervisory information with thebanking supervisory authorities in other countries and/or regions.
Article 12 The banking regulatory authority under theState Council shall make public its supervisory process and procedures, andestablish relevant responsibility and accountability system and internal compliancemonitoring mechanism.
Article 13 Local governments andrelevant government departments at various levels shall provide support andassistance for the banking regulatory authority in its exercise of supervisoryactivities , such as resolving problems of banking institutions, investigatingand taking enforcement actions against illegal financial activities.
Article 14 The banking regulatoryauthority under the State Council shall be subject to the auditing andsupervision exercised by relevant government agencies such as the auditinstitution and supervisory institution under the State Council.
Chapter III Regulatory andSupervisory Responsibilities
Article 15 The banking regulatory authority under theState Council shall, in accordance with relevant laws and administrative regulations,formulate and promulgate supervisory rules and regulations for bankinginstitutions.
Article 16 The banking regulatoryauthority under the State Council shall, in accordance with the criteria andprocedures stipulated in relevant laws and administrative regulations,authorize the establishment, changes, termination and business scope of bankinginstitutions.
Article 17 The banking regulatoryauthority under the State Council shall review and assess the source ofcapital, financial strength, ability to provide further financial support aswell as integrity and standing of the shareholders while reviewing the proposalsto establish a banking institution or proposals to change the shareholders thathold a particular percentage or more of the total capital or total shares asstipulated in relevant laws and regulations.
Article 18 Products and services offeredby a banking institution within its business scope authorized by the bankingregulatory authority under the State Council shall, in accordance with relevantregulations, be subject to prior approval of the banking regulatory authorityunder the State Council or the report for filing requirement. The bankingregulatory authority under the State Council shall, in accordance with relevantlaws and administrative regulations, formulate and make public regulations onwhich product or service requires prior approval and/or which requires reportfor filing.
Article 19 Without the authorization ofthe banking regulatory authority under the State Council, no institution orindividuals may establish a banking institution or engage in bankingbusinesses.
Article 20 The banking regulatory authorityunder the State Council shall conduct fit and proper tests for directors andsenior managers. For this purpose, the banking regulatory authority under theState Council shall formulate specific regulations on fit and proper tests fordirectors and senior managers of banking institutions.
Article 21 Prudential regulations andrequirements applied to banking institutions may be stipulated in laws or administrativeregulations, or formulated by the banking regulatory authority under the StateCouncil in accordance with relevant laws and administrative regulations.
“prudentialregulations and requirements” specified in the preceding paragraph shall coverrisk management, internal controls, capital adequacy, asset quality, loan lossprovisioning, risk concentrations, connected transactions and liquidity managementetc..
Thebanking institutions shall strictly comply with the prudential regulations andrequirements.
Article 22 The banking regulatoryauthority under the State Council shall, within a prescribed period of time,make a decision of approval or disapproval in writing for the followingapplications. If a decision of disapproval is made, it shall specify thereasons for disapproval:
(1) In case ofestablishment of a banking institution, within six months from the date of receivingthe application documents;
(2) In case of changes ortermination of a banking institution or offering new products or serviceswithin the business scope authorized by the banking regulatory authority underthe State Council, within three months from the date of receiving theapplication documents;
(3) In case of fit andproper tests for directors and senior managers, within one month from the dateof receiving the application documents.
Article 23 Thebanking regulatory authority shall conduct off-site surveillance of thebusiness operations and risk profiles of banking institutions. For thispurpose, it shall establish a supervisory information system for the analysisand assessment of the risk profiles of banking institutions.
Article 24 Thebanking regulatory authority shall conduct on-site examination of the businessoperations and risk profiles of banking institutions.
The banking regulatory authorityshall formulate on-site examination procedures to standardize on-site examinationactivities.
Article 25 The bankingregulatory authority under the State Council shall regulate and supervisebanking institutions on a consolidated basis.
Article 26 The banking regulatory authority under theState Council shall make an official response to the proposals for the examinationof banking institutions made by the people’s Bank of China within thirty days fromthe date of receiving the proposals.
Article 27 The banking regulatory authority underthe State Council shall establish a rating system and early warning system forbanking institutions, thus, based on the rating and risk profiles of bankinginstitutions, determining the frequency and scope of on-site examination aswell as other supervisory measures that may be deemed necessary.
Article 28 The banking regulatory authority underthe State Council shall establish an identification and reporting system for theunexpected events in the banking sector.
The banking regulatory authority shall, as soon asidentifying any unexpected events that may result in systemic banking risks,hence causing severe social instability, report to the Chairman of the bankingregulatory authority under the State Council. The Chairman of the bankingregulatory authority under the State Council shall report to the State Councilwhile informing relevant government agencies such as the People’s Bank of Chinaand finance department under the State Council when he deems necessary.
Article 29 The banking regulatory authority under the StateCouncil shall, in consultation with relevant government agencies such as thePeople’s Bank of China and finance department under the State Council, establisha resolution system for the unexpected events in the banking sector. For thispurpose, the banking regulatory authority under the State Council shallformulate contingency plans for the resolution of the unexpected events in thebanking sector, which shall specify the institutions and staff members thatassume resolution responsibilities, as well as resolution measures andprocedures, hence achieving timely and effective resolution of the unexpectedevents in the banking sector.
Article30 Thebanking regulatory authority under the State Council shall compile and publishstatistics and reports of banking institutions in accordance with relevantregulations of the State.
Article 31 The banking regulatory authority underthe State Council shall guide and supervise the activities of theself-regulating organizations of the banking industry.
Thecharter of the self-regulating organizations of the banking industry shall besubmitted to the banking regulatory authority under the State Council for filing.
Article 32 The bankingregulatory authority under the State Council may engage in the international financialactivities related to banking regulation and supervision.
Chapter IV Supervisory Methods andProcedures
Article 33 The banking regulatory authority shall,for the purpose of performing its responsibilities, have the authority torequire banking institutions to submit, in accordance with relevant regulations,balance sheets, income statements, other financial and accounting reports,statistical reports, information regarding operation and management as well asthe audit reports prepared by certified public accountants.
Article 34 The banking regulatory authority may takethe following measures to conduct on-site examination for the purpose ofexercising prudential supervision:
(1) to enter the bankinginstitution for on-site examination;
(2) to inquire of thestaff of banking institutions and require them to give explanations for mattersrelated to the on-site examination;
(3) to have full accessto and make copies of the banking institutions’ documents and materials relatedto the on-site examination, and to seal up documents and materials likely to beremoved, concealed or destroyed; and
(4) to examine thebanking institutions’ computer system used for business operation andmanagement.
The on-site examination is subject to prior approvalof the head of the banking regulatory authority. The on-site examiners shallnot be less than two persons, who shall produce their examiner’ certificatesand examination notice upon examination. If the number of on-site examiners isless than two, or the examiners fail to produce their examiner’ certificates orexamination notice upon examination, the banking institutions shall have theright to refuse the examination.
Article 35 The banking regulatory authority may, forthe purpose of performing its responsibilities, hold supervisory consultationswith the directors and senior managers of a banking institution, inquiringabout the major activities concerning business operation and risk management ofthe banking institution.
Article 36 The banking regulatory authority shallrequire banking institutions, in accordance with relevant regulations, todisclose to the public information regarding their financial and accountingreports, risk management policies and procedures, changes in the directors andsenior managers as well as other major activities.
Article 37 When a banking institution fails to meetprudential regulations or requirements, the banking regulatory authority underthe State Council or its provincial offices shall require it to take remedialmeasures within a prescribed period of time. If the banking institution failsto correct the deficiencies within the prescribed period of time, or the safetyand soundness of the banking institution is severely threatened and theinterests of its depositors and/or other customers are likely to be prejudiced,the banking regulatory authority under the State Council or its provincialoffices may, subject to the approval of its Chairman or directors, take thefollowing measures depending on the specific circumstances:
(1) to suspend part of thebusinesses of the banking institution and/or withhold approval of new productsor services;
(2) to restrict dividendor other payments to shareholders;
(3) to restrict assettransfers;
(4) to order thecontrolling shareholders to transfer shares or restrict the powers of relevant shareholders;
(5) to order the bankinginstitution to replace the directors and/or senior managers or restrict theirpowers; and
(6) to withhold approvalof branching.
The banking institution shall report to the bankingregulatory authority under the State Council or its provincial offices once it isrestored to meet the prudential regulations or requirements after taking correctivemeasures. The banking regulatory authority under the State Council or itsprovincial offices shall terminate the measures prescribed by the precedingparagraph within three days after the verification of compliance.
Article 38 When a banking institution isexperiencing or likely to experience a credit crisis, thereby seriouslyprejudicing the interests of depositors and/or other customers, the bankingregulatory authority under the State Council may take over the bankinginstitution or assist a restructuring. The take-over or restructuring shall becarried out in accordance with relevant laws and administrative regulations.
Article 39 When a banking institution has been foundserious violations of law and/or regulations, or significant unsafe or unsoundpractices, thereby posing a grave danger to financial order or seriouslythreatening public interests unless it is closed, the banking regulatoryauthority under the State Council shall have the authority to close it inaccordance with relevant laws and regulations.
Article 40 In the case of take-over, restructuring,or closure of a banking institution, the banking regulatory authority under theState Council shall have the authority to require the directors, seniormanagers and other staff of the banking institution to perform their dutiesaccording to the requirements of the banking regulatory authority under theState Council.
In the course of take-over, restructuring orliquidation after the closure of a banking institution, the banking regulatoryauthority under the State Council shall have the authority, subject to theapproval of its Chairman, to take the following measures against the directorsand senior managers directly in charge and other staff directly heldresponsible:
(1) when the departurefrom the People’s Republic of China of the directors and senior managersdirectly in charge and other staff directly held responsible is likely to bedetrimental to the interests of the State, the banking regulatory authorityunder the State Council may request the entry-exit control department under thepublic securities authority to prevent them from leaving the People’s Republicof China; and
(2) to request thejudicial institutions to prohibit the directors and senior managers directly incharge and other staff directly held responsible from moving or transferringtheir properties, or establishing other rights on their properties.
Article 41 The banking regulatory authority or itsprovincial offices hall have the authority, subject to the approval of itsChairman or directors, to inspect the deposit accounts of the bankinginstitution suspected of violation of laws and regulations as well as those ofits staff and connected parties, and/or request the judicial institutions tofreeze the illegally obtained funds that are suspected to be transferred orconcealed.
Chapter V Legal Liability
Article 42 When the supervisory staff of the bankingregulatory authority commits any of the following acts, he shall be subject toadministrative sanctions according to law. If the case constitutes a crime, heshall be investigated for criminal liability according to law:
(1) to authorize, inviolation of regulations, the banking institutions’ establishment, changes,termination, business scope or products or services within its business scope;
(2) to conduct on-siteexamination of banking institutions in violation of regulations;
(3) to fail to reportunexpected events in the banking sector in accordance with Article 28 of thislaw;
(4) to inspect depositaccounts or request freezing of funds in violation of regulations;
(5) to take measures orenforcement actions against banking institutions in violation of regulations;and
(6) other acts such asabuse of power and/or neglect of duties.
The supervisory staff of the banking regulatoryauthority who commits embezzlement, bribery or divulgence of state orcommercial confidential information shall, if the case constitutes a crime, beinvestigated for criminal liability according to law, and if the case does notconstitute a crime, be subject to administrative sanctions according to law.
Article 43 When a banking institution isestablished, or banking businesses are conducted without the authorization of thebanking regulatory authority under the State Council, the said bankinginstitution shall be closed by the banking regulatory authority under the StateCouncil. If the case constitutes a crime, criminal liability shall be pursuedaccording to law. If the case does not constitute a crime, the bankingregulatory authority under the State Council shall confiscate the illegalgains. If the amount of illegal gains is more than 500,000 yuan, a fine rangingfrom one to five times the amount of illegal gains shall be imposed. If noillegal gains have been derived or the amount of illegal gains is less than500,000 yuan, a fine ranging from 500,000 yuan to 2,000,000 yuan shall beimposed.
Article 44 When a banking institution commits any ofthe following acts, the banking regulatory authority under the State Councilshall order it to take corrective measures, and, if illegal gains have beenderived, shall confiscate the illegal gains. If the amount of illegal gains ismore than 500,000 yuan, a fine ranging from one to five times the amount ofillegal gains shall be imposed. If no illegal gains have been derived, or theamount of illegal gains is less than 500,000 yuan, a fine ranging from 500,000yuan to 2,000,000 yuan shall be imposed. If the case is particularly serious,or the banking institution fails to make correction within the prescribedperiod of time, the banking regulatory authority under the State Council mayorder suspension of business for consolidation or revocation of banking permit.If the case constitutes a crime, criminal liability shall be pursued accordingto law:
(1) to establish a branchwithout authorization;
(2) to make changes orterminate its business operation without authorization;
(3) to offer a product orservice without approval or the report for filing procedures; and
(4) to raise or lowerinterest rates on deposits or loans in violation of regulations.
Article 45 When a banking institution commits any ofthe following acts, the banking regulatory authority under the State Councilshall order it to take corrective measures, and concurrently impose a fineranging from 200,000 yuan to 500,000 yuan. If the case is particularly serious,or the banking institution fails to make correction within the prescribedperiod of time, the banking regulatory authority under the State Council mayorder suspension of business for consolidation or revocation of banking permit.If the case constitutes a crime, criminal liability shall be pursued accordingto law:
(1) to appoint directorsor senior managers without the fit and proper tests;
(2) to refuse or obstructthe off-site surveillance or on-site examination;
(3) to submit statements,reports, documents or materials that are false or conceal important facts;
(4) to fail to discloseinformation to the public in accordance with regulations;
(5) to fail to meetprudential regulations or requirements with serious consequences; and
