To support the pilot program of RMB settlement of cross-border trade and increase the avenues for RMB reflowing to China, this Notice clarifies the relevant matters concerning the pilot program on investment in the interbank bond market with RMB funds by three types of institutions including overseas RMB clearing banks pursuant to the Law of the People’s Republic of China on the People’s Bank of China and other relevant laws and regulations.
1. Three types of institutions (hereinafter referred to as overseas institutions) refer to foreign central banks or monetary authorities (hereinafter referred to as foreign central banks), clearing banks for RMB business in Hong Kong and Macau (hereinafter referred to as HK & Macau RMB clearing banks), and overseas participating banks for RMB settlement of cross-border trade (hereinafter referred to overseas participating banks).
The relevant provisions herein are applicable to investment in the interbank bond market with RMB funds by other overseas financial institutions participating in the pilot program of cross-border services trade.
2. RMB funds that are used by overseas institutions for investment in the interbank bond market shall be RMB funds obtained by them from monetary cooperation among central banks and RMB business related to cross-border trade and investment pursuant to relevant provisions.
3. In order to gain access to the interbank bond market, a foreign central bank needs to submit a written application and the following documents to the People’s Bank of China:
(1) explanation on basic information of the organization;
(2) explanation on source and scale of RMB funds;
(3) proposed investment amount and investment plan;
(4) basic information of the relevant person(s)-in-charge of bond investments; and
(5) other materials required by the People’s Bank of China.
4. To gain access to the interbank bond market, Hong Kong & Macau clearing banks and overseas participating banks shall submit a written application and the following materials to the People’s Bank of China:
(1) relevant materials as specified in aforesaid items (1)~(5);
(2) RMB settlement agency agreement (when applicable) signed with a domestic agent bank;
(3) registration certificate in the country or region where it is incorporated or proof of approval of establishment by the regulatory authorities of its home country (region);
(4) valid identity document of the legal representative or designated signatory (photocopy);
(5) statement on whether the organization has been punished by the regulatory authorities in the last three years; and
(6) audited financial statements of the previous three years.
5. With the approval of the People’s Bank of China, overseas institutions may engage in bond investment business in the interbank bond market within the approved quota, and follow the following procedures:
(1) Foreign central banks and Hong Kong & Macao RMB clearing banks may either entrust an interbank bond market settlement agent able to conduct international settlement business to conduct bond trading and settlement，or directly apply to China Government Securities Depository Trust & Clearing Co Ltd. to open bond accounts, and to the National Interbank Funding Centre to connect with the bond trading network.
(2) Overseas participating banks shall entrust an interbank bond market settlement agent able to conduct international settlement business to conduct bond trading and settlement.
6. An overseas institution shall, pursuant to the Administrative Rules on RMB Bank Settlement Accounts (PBC Decree No.5 [2003]) and other relevant provisions governing the administration of accounts, open a RMB special account with a bank located within China, which is subject to administration of RMB special deposit accounts and specifically used for the settlement of bond trading. Each overseas institution is allowed to open one RMB special account only. The approval document issued by the People’s Bank of China is to be presented to the bank in order to open the RMB special account, while a permit for the opening of a basic deposit account is not required. Such opening shall also be reported by the bank to the local branch office of the People’s Bank of China for examination and approval.
The opening bank shall, as required, perform its obligation in the statistics and monitoring of foreign debts, and report such information as statements of inflow and outflow of funds related to overseas institutions to the People’s Bank of China and the State Administration of Foreign Exchange in a timely and accurate manner.
7. An overseas institution shall not conduct bond trading with its parent company or other subsidiaries (branch offices) of its parent company.
8. Overseas institutions engaging in bond investment business in the interbank bond market shall abide by Chinese laws and regulations as well as relevant provisions governing interbank bond market, and accept industry self-regulation by the National Association of Financial Market Institutional Investors.
9. A settlement agent entrusted by overseas institutions for bond trading and settlement shall file with the People’s Bank of China Shanghai Head Office.
10. The National Interbank Funding Centre and China Government Securities Depository Trust & Clearing Co Ltd shall conduct the first-line monitoring of settlement activities of overseas institutions in the interbank bond market, report the relevant information to the People’s Bank of China on a quarterly basis, and send a photocopy thereof to the National Association of Financial Market Institutional Investors. Any abnormal situations found shall be promptly reported.
11. The National Association of Financial Market Institutional Investors shall conduct the industry self-regulation of trading and settlement activities of overseas institutions in the interbank bond market.
12. The National Interbank Funding Centre and China Government Securities Depository Trust & Clearing Co. Ltd shall, pursuant to the Notice, formulate relevant rules for their respective operations, which shall be implemented upon being filed for the record with and approved by the People’s Bank of China.
13. Overseas institutions shall use Chinese language in going through the relevant procedures for access to the interbank bond market pursuant to these Notices. In case of any discrepancy between the Chinese version and a foreign language version, the Chinese version shall prevail.
14. The Notice shall come into force as of the date of its promulgation.
People’s Bank of China
16 August 2010
