Order of the President of the People's Republic
of China
No. 11
The Law of the People's Republic of China on Regulation of and
Supervision over the Banking Industry, adopted at the 6th Meeting
of the Standing Committee of the Tenth National People's Congress
of the People's Republic of China on December 27, 2003, is hereby
promulgated and shall go into effect as of February 1, 2004.
? Hu Jintao??
President of the
People's Republic of China
December 27,
2003
Contents
Chapter I??General Provisions
Chapter II?The Regulatory Authority
Chapter III?Regulatory and Supervisory Responsibilities
Chapter IV ?Supervisory Measures
Chapter V ??Legal Responsibility
Chapter VI?Supplementary Provisions
Chapter I
General Provisions
Article 1 This law is enacted with a view to improving
regulation of and supervision over the banking industry,
standardizing such regulation and supervision, preventing and
mitigating risks in the banking industry, protecting the lawful
rights and interests of depositors and other customers, and
promoting the sound development of the banking industry.
Article 2 The banking regulatory authority under the State
Council shall be responsible for the regulation of and supervision
over the financial institutions of the banking industry and their
business operations throughout the country.
For purposes of this law, the "financial institutions of the
banking industry" refer to the financial institutions established
in the People's Republic of China that receive deposits from the
general public, including, among others, commercial banks, urban
credit cooperatives and rural credit cooperatives, and policy
banks.
The provisions of this Law pertaining to the regulation of and
supervision over the financial institutions of the banking industry
are applicable to the regulation and supervision of the financial
asset management companies, trust and investment corporations,
finance companies and financial leasing companies established in
the territory of the People's Republic of China and other financial
institutions established with the approval of the banking
regulatory authority under the State Council.
The banking regulatory authority under the State Council shall,
in accordance with the relevant provisions of this Law, regulate
and supervise the financial institutions that, upon its approval,
are established outside the People's Republic of China, as well as
the business operations conducted abroad by the financial
institutions mentioned in the preceding two paragraphs.
Article 3 The objectives of regulation of and supervision over
the banking industry are to promote the lawful, sound and steady
operation of the banking industry and preserve public trust in the
industry.
The banking industry shall be regulated and supervised in such a
way as to protect fair competition in the industry and increase the
competitiveness of the industry.
Article 4 When exercising regulation and supervision, the
banking regulatory authority shall follow the principles of
law-abiding openness, impartiality and efficiency.
Article 5 Performance of the duties of supervision in accordance
with law by banking regulatory authority and its staff members
engaged in supervision shall be protected by law. Local
governments, government departments at various levels, public
organizations and individuals shall not interfere.
Article 6 The banking regulatory authority under the State
Council shall establish a mechanism with the People's Bank of China
and other financial regulatory authorities under the State Council
for sharing supervisory information.
Article 7 The banking regulatory authority under the State
Council may establish a cooperative mechanism of supervision with
the banking regulatory authorities in other countries or regions
for cross-border supervision.
Chapter II
The Regulatory Authority
Article 8 In light of the need to perform its duties, the
banking regulatory authority under the State Council may set up
local offices. It shall exercise unified leadership and
administration of such offices.
The local offices of the banking regulatory authority under the
State Council shall perform their supervisory duties within the
scope authorized by the said authority.
Article 9 The staff members of the banking regulatory authority
who are engaged in supervision shall have the professional
knowledge and work experience commensurate with the positions they
are holding.
Article 10 Staff members of the banking regulatory authority
shall be devoted to their duties, act in accordance with law and be
impartial and honest; they shall not take advantage of their
positions to seek illegitimate benefits, or concurrently hold
positions in enterprises such as financial institutions.
Article 11 Staff members of the banking regulatory authority
shall, in accordance with law, guard State secrets, and it is
incumbent upon them to guard the secrets of the financial
institutions of the banking industry and of the parties subject to
their supervision.
For exchanging supervisory information with the banking
regulatory authorities of other countries and regions, the banking
regulatory authority under the State Council shall make
arrangements for preserving the confidentiality of information.
Article 12 The banking regulatory authority under the State
Council shall make public its supervisory procedures, and establish
a supervisory responsibility system and an internal supervisory
system.
Article 13 Local governments and the relevant government
departments at various levels shall cooperate with and provide
assistance to the banking regulatory authority when the latter
deals with risks confronted by financial institutions of the
banking industry, investigates and handles violations of law in
finance, and exercises supervision in other manners.
Article 14 The auditing, supervisory and other departments under
the State Council shall, in accordance with the provisions of
relevant laws, oversee the activities of the banking regulatory
authority under the State Council.
Chapter III
Regulatory and Supervisory Responsibilities
Article 15 The banking regulatory authority under the State
Council shall, in accordance with laws and administrative
regulations, formulate and promulgate supervisory rules and
regulations governing the financial institutions of the banking
industry and their business activities.
Article 16 The banking regulatory authority under the State
Council shall, in accordance with the requirements and procedures
provided for in laws and administrative regulations, examine,
before giving approval, the establishment, change, termination and
business scope of financial institutions of the banking
industry.
Article 17 Where an application is submitted for the
establishment of a financial institution of the banking industry
and where such an institution intends to replace a shareholder that
holds more than the specified percentage of the total amount of
capital or shares, the banking regulatory authority under the State
Council shall examine the source of capital, financial strength,
ability to replenish capital and integrity of the shareholders.
Article 18 The types of services offered by a financial
institution of the banking industry within its business scope
shall, in accordance with relevant regulations, be subject to
examination and approval by the banking regulatory authority under
the State Council or be submitted to the authority for the record.
With regard to the types of services that are subject to
examination and approval or to being put on record, the banking
regulatory authority under the State Council shall, in accordance
with relevant laws and administrative regulations, formulate
regulations and make them known to the public.
Article 19 Without approval by the banking regulatory authority
under the State Council, no institution or individual may establish
a financial institution of the banking industry or engage in
business activities of such an institution.
Article 20 The banking regulatory authority under the State
Council shall exercise control of the qualifications for the
positions of the directors and senior managers of the financial
institutions of the banking industry. Specific measures in this
regard shall be formulated by the banking regulatory authority
under the State Council.
Article 21 The rules of prudent operation of the financial
institutions of the banking industry shall be stipulated in laws or
administrative regulations, and they may also be formulated by the
banking regulatory authority under the State Council in accordance
with relevant laws and administrative regulations.
The rules of prudent operation mentioned in the preceding
paragraph shall cover, among other things, risk management,
internal control, capital adequacy, asset quality, loan loss
provisioning, risk concentration, connected transactions, and
liquidity management of assets.
The financial institutions of the banking industry shall
strictly observe the rules of prudent operation.
Article 22 The banking regulatory authority under the State
Council shall, within a prescribed period of time, make a decision
of approval or disapproval in writing in response to the following
applications; if it makes a decision of disapproval, it shall
explain the reasons why:
(1) for the establishment of a financial institution of the
banking industry, it is six months from the date it receives the
application documents;
(2) for the change or termination of a financial institution of
the banking industry, for the business scope or for offering more
types of services within the business scope, it is three months
from the date it receives the application documents; and
(3) for examination of the qualifications of a director or
senior manager, it is 30 days from the date it receives the
application documents.
Article 23 The banking regulatory authority shall conduct
off-site supervision of the business operations and risk profile of
the financial institutions of the banking industry, for which it
shall establish an information system to analyse and assess the
risk profile of such institutions.
Article 24 The banking regulatory authority shall conduct
on-site inspection of the business operations and risk profile of
the financial institutions of the banking industry.
The banking regulatory authority under the State Council shall
formulate procedures for on-site inspection to standardize such
inspection.
Article 25 The banking regulatory authority under the State
Council shall supervise the financial institutions of the banking
industry on a consolidated basis.
Article 26 With respect to the proposal made by the People's
Bank of China for inspection of a financial institution of the
banking industry, the banking regulatory authority under the State
Council shall respond within 30 days from the date it receives the
proposal.
Article 27 The banking regulatory authority under the State
Council shall establish a rating system and an early-warning
mechanism for supervision over the financial institutions of the
banking industry, in order to determine, on the basis of the rating
and risk profile of such institutions, the frequency and scope of
on-site inspection of the institutions, as well as other
supervisory measures that need to be taken.
Article 28 The banking regulatory authority under the State
Council shall establish a system of post responsibility for
identifying and reporting emergencies in the banking industry.
When it identifies any emergency that may lead to systemic risks
in the banking industry and thus seriously jeopardize social
stability, the banking regulatory authority shall immediately
report the matter to the leading member of the banking regulatory
authority under the State Council; the leading member shall, when
deeming it necessary, immediately report to the State Council while
informing the People's Bank of China, the finance department and
other relevant departments under the State Council of the
matter.
Article 29 The banking regulatory authority under the State
Council shall, in conjunction with the People's Bank of China, the
finance department and other relevant departments under the State
Council, establish a system for coping with emergencies in the
banking industry, including formulating contingency plans,
designating institutions and staff members, specifying their
responsibilities and the measures and procedures, in order to
ensure that emergencies in the banking industry are handled in a
timely and effective manner.
Article 30 The banking regulatory authority under the State
Council shall be responsible for compiling, in a unified manner,
statistics and reports of the financial institutions of the banking
industry throughout the country and, in accordance with the
relevant regulations of the State, publish the statistics and
reports.
Article 31 The banking regulatory authority under the State
Council shall guide and oversee the activities of the
self-regulated organizations of the banking industry.
The self-regulated organizations of the banking industry shall
submit their articles of association to the banking regulatory
authority under the State Council for the record.
Article 32 The banking regulatory authority under the State
Council may engage in international exchange and cooperation
related to regulation of and supervision over the banking
industry.
Chapter IV
Supervisory Measures
Article 33 The banking regulatory authority shall, in light of
the need for performing its duties, have the power to require the
financial institutions of the banking industry to submit, in
accordance with relevant regulations, their balance sheets, profit
statements, other financial accounting statements, statistical
reports and information concerning business operations and
management, as well as the audit reports prepared by certified
public accountants.
Article 34 The banking regulatory authority may take the
following measures to conduct on-site inspection, as required by
prudent supervision:
(1) to enter a financial institution of the banking industry for
on-site inspection;
(2) to interview staff members of a financial institution and
require them to provide explanations on the matters under
inspection;
(3) to check and make copies of the financial institution's
documents and materials related to the matters under inspection,
and to seal up the documents and materials that are likely to be
removed, concealed or destroyed; and
(4) to examine the computer system with which the financial
institution controls its business data.
On-site inspection shall be subject to approval by the leading
member of the banking regulatory authority. For on-site inspection,
there shall be no less than two inspectors, who shall produce their
legal certificates and the written notification of inspection.
Where there are less than two inspectors, or no legal certificates
and written notification of inspection are produced, the financial
institution shall have the right to refuse to accept
inspection.
Article 35 The banking regulatory authority may, in light of the
need for performing its duties, hold supervisory consultations with
the directors and senior managers of a financial institution of the
banking industry, asking them to explain the important matters
concerning business operations and risk management.
Article 36 The banking regulatory authority shall instruct
financial institutions of the banking industry to disclose,
truthfully and in accordance with relevant regulations, to the
public information, including, among other things, their financial
and accounting reports, statements of risk management, changes in
the directors and senior managers and other important matters.
Article 37 Where a financial institution of the banking industry
violates the rules of prudent operation, the banking regulatory
authority under the State Council or its office at the provincial
level shall instruct it to rectify within a time limit; if it fails
to comply at the expiration of the time limit, or the violation
seriously threatens the sound and steady operation of the
institution, jeopardizes the lawful rights and interests of the
depositors and other customers, the banking regulatory authority
under the State Council or its office at the provincial level may,
with the approval of the leading member, take the following
measures, depending on the seriousness of the circumstances:
(1) instructing it to suspend part of its business or ceasing to
give approval to its starting of new businesses;
(2) restricting the distribution of dividends and other
returns;
(3) restricting asset transfers;
(4) instructing the holding shareholders to transfer their
rights or restricting the rights of the shareholders concerned;
(5) instructing the institution to replace the directors or
senior managers or restricting their rights; and
(6) ceasing to give approval to its establishment of new
branches.
After rectification, the financial institution shall submit a
report to the banking regulatory authority under the State Council
or its office at the provincial level. After the said authority or
office inspects the institution and accepts it as conforming to the
rules of prudent operation, it shall, within three days after the
date of acceptance, discontinue the measures prescribed in the
preceding paragraph.
Article 38 Where a financial institution of the banking industry
is experiencing or is likely to experience a credit crisis, thereby
seriously jeopardizing the lawful rights and interests of
depositors and other customers, the banking regulatory authority
under the State Council may, in accordance with law, take over the
institution or facilitate its restructuring. The take-over and
restructuring shall be carried out in accordance with relevant laws
and the regulations of the State Council.
Article 39 Where a financial institution of the banking industry
operates in violation of laws or is not operated or managed
properly, thereby seriously threatening financial order and
undermining public interests unless it is closed, the banking
regulatory authority under the State Council shall have the power
to close it.
Article 40 Where a financial institution of banking industry is
taken over, restructured, or closed, the banking regulatory
authority under the State Council shall have the power to require
the directors, senior managers and other staff members of the
institution to perform their duties according to the requirements
of the authority.
In the course of the take-over, restructuring or liquidation
after the closure of the institution, the banking regulatory
authority under the State Council may, with the approval of the
leading member of the authority, take the following measures
against the directors and senior managers who are directly in
charge and the other staff members who are directly
responsible:
(1) where their departure from the People's Republic of China
will cause heavy losses to the interests of the State, notifying
the exit control authority of the need to prevent them, in
accordance with law, from leaving the country; and
(2) submitting an application to the judicial authority for
prohibiting their moving to other places or their transferring of
their property, or for establishing other rights on their
property.
Article 41 A banking regulatory authority shall, with the
approval of the leading member of the banking regulatory authority
under the State Council or of its office at the provincial level,
have the power to inquire about the bank accounts of the financial
institution of the banking industry suspected of violating laws in
financial affairs, and the bank accounts of its staff members and
connected parties; and may, with the approval of the said leading
member, submit an application to the judicial authority for
freezing the illegally obtained funds that are suspected of being
about to be moved to other places or concealed.
Chapter V
Legal Responsibility
Article 42 Any staff member of the banking regulatory authority
engaged in supervision commits any of the following acts shall be
given administrative sanctions according to law; and if a crime is
constituted, he shall be investigated for criminal responsibility
in accordance with law:
(1) in violation of relevant regulations, examining and giving
approval to the establishment, change or termination of a financial
institution of the banking industry, or its business scope or the
services it offers within its business scope;
(2) in violation of relevant regulations, conducting on-site
inspection of a financial institution of the banking industry;
(3) failing to report an emergency in accordance with the
provisions in Article 28 of this Law;
(4) in violation of relevant regulations, inquiring about bank
accounts or submitting an application for freezing funds;
(5) in violation of relevant regulations, taking measures
against or penalizing a financial institution of the banking
industry; and
(6) other acts such as abuse of power and neglect of duties.
Any staff member of the banking regulatory authority engaged in
supervision who commits embezzlement, bribery or divulgence of
State secrets or the business secrets he knows, which constitutes a
crime, shall be investigated for criminal responsibility according
to law; and if it is not serious enough to constitute a crime, he
shall be given administrative sanctions according to law.
Article 43 Where a financial institution of the banking industry
is established without authorization, or the business activities of
financial institutions are illegally engaged in, the banking
regulatory authority under the State Council shall outlaw such an
institution and such business activities. If a crime is
constituted, criminal responsibility shall be investigated
according to law; if the case is not serious enough to constitute a
crime, the unlawful gains shall be confiscated by the banking
regulatory authority under the State Council; if the unlawful gains
exceed RMB 500,000 yuan, a fine of not less than the amount of the
unlawful gains but not more than five times that amount shall, in
addition, be imposed; and if there are no unlawful gains or the
amount of such gains is less than 500,000 yuan, a fine of not less
than 500,000 yuan but not more than 2,000,000 yuan shall be
imposed.
Article 44 Where a financial institution of the banking industry
commits one of the following acts, it shall be instructed by the
banking regulatory authority under the State Council to rectify; if
there are unlawful gains, such gains shall be confiscated; if the
unlawful gains exceed 500,000 yuan, it shall, in addition, be fined
not less than the amount of such gains but not more than five times
that amount ; if there are no unlawful gains, or such gains are
less than 500,000 yuan, it shall be fined not less than 500,000
yuan but not more than 2,000,000 yuan; if the circumstances are
particularly serious, or if the institution fails to rectify within
the prescribed period of time, the banking regulatory authority
under the State Council may instruct it to suspend business for
rectification or revoke its business license; if a crime is
constituted, the institution shall be investigated for criminal
responsibility according to law:
(1) establishing a branch without approval;
(2) making changes or terminating business operations without
approval;
(3) in violation of relevant regulations, engaging in business
activities for which no approval is obtained or which are not put
on record; and
(4) in violation of relevant regulations, raising or lowering
interest rates on deposits or loans.
Article 45 Where a financial institution of the banking industry
commits one of the following acts, the banking regulatory authority
under the State Council shall instruct it to rectify and shall, in
addition, impose on it a fine of not less than 200,000 yuan but not
more than 500,000 yuan; if the circumstances are particularly
serious, or if the institution fails to rectify within the
prescribed period of time, the said authority may instruct it to
suspend business for rectification or revoke its business license;
if a crime is constituted, the institution shall be investigated
for criminal responsibility according to law:
(1) appointing directors or senior managers without subjecting
their qualifications for the positions to examination;
(2) refusing to accept or obstructing the off-site supervision
or on-site inspection;
(3) providing statements, reports, documents or materials that
are false or conceal important facts;
(4) failing to disclose information to the public in accordance
with relevant regulations;
(5) violating the rules of prudent operation to a serious
extent; and
(6) refusing to enforce the measures as provided for in Article
37 of this Law.
Article 46 Where a financial institution of the banking industry
fails to provide statements, reports, documents or materials in
accordance with relevant regulations, the banking regulatory
authority shall instruct it to rectify. If it fails to comply
within the prescribed period of time, it shall be fined not less
than 100,000 yuan but not more than 300,000 yuan.
Article 47 Where a financial institution of the banking industry
violates laws, administrative regulations or regulations of the
State governing regulation and supervision of the banking industry,
the banking regulatory authority may, in addition to the penalties
specified in Articles 43, 44, 45 and 46 of this Law, take the
following measures, depending on the seriousness of the
circumstances:
(1) to instruct the financial institution to impose disciplinary
sanctions on the directors and senior mangers who are directly in
charge and the other persons who are directly responsible;
(2) if the case is not serious enough to constitute a crime, to
give disciplinary warnings to the directors and senior managers who
are directly in charge and the other persons who are directly
responsible and impose on them each a fine of not less than 50,000
yuan but not more than 500,000 yuan; and
(3) to disqualify the directors and senior mangers who are
directly in charge for a specified period of time or for life, or
to prohibit them and the other persons who are directly responsible
from working in the banking industry for a specified period of time
or for life.
Chapter VI
Supplementary Provisions
Article 48 Where with regard to the regulation of and
supervision over the policy banks and asset management companies
established in the territory of the People's Republic of China,
laws and administrative regulations provide otherwise, the
provisions there shall prevail.
Article 49 Where with regard to the regulation of and
supervision over the wholly foreign-funded financial institutions,
Chinese-foreign joint venture financial institutions and branches
of foreign financial institutions of the banking industry that are
established in the territory of the People's Republic of China,
laws and administrative regulations provide otherwise, the
provisions there shall prevail.
Article 50 This Law shall go into effect as of February 1,
2004.
Notice: All copyrights of the English version of the Orders
of the President of the People's Republic of China released on
gov.cn belong to the Legislative Affairs Commission of the Standing
Committee of the National People's Congress of the People's
Republic of China.
(Source: Legislative Affairs Commission of the Standing
Committee of the National People’s Congress)
