Banking Supervision Law of the People’s Republic of China
(Adopted at the Sixth Session of the Standing Committee of the Tenth National People’s Congress on December 27, 2003, amended at the Twenty-fourth Session of the Standing Committee of the Tenth National People’s Congress on October 31, 2006)
Contents
Chapter I General Provisions
Chapter II The Banking Regulatory Authority
Chapter III Regulatory and Supervisory Responsibilities
Chapter IV Supervisory Methods and Procedures
Chapter V Legal Liability
Chapter VI Supplementary Provisions
Chapter I General Provisions
Article 1 This law is enacted for the purposes of improving banking regulation and supervision, standardizing banking supervisory process and procedures, preventing and mitigating financial risks in the banking 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 authority under the State Council shall be responsible for the regulation and supervision of the banking institutions in China and their business operations.
For the purposes of this law, the term “banking institutions” means financial institutions established in the People’s Republic of China that take 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 and supervision of banking institutions are applicable to the regulation and supervision of asset management companies, trust and investment companies, finance companies, financial leasing companies and other financial institutions established in the People’s Republic of China as authorized by the banking regulatory authority under the State Council.
The banking regulatory authority under the State Council shall, in accordance with the applicable provisions of this law, regulate and supervise the financial institutions that, subject to its approval, are established outside the People’s Republic of China, as well as the overseas business operations conducted by the financial institutions referred to in the preceding two paragraphs.
Article 3 The objectives of banking regulation and supervision are to promote the safety and soundness of the banking industry and maintain public confidence in the banking industry.
Towards these objectives, the banking regulation and supervision shall protect fair competition in the banking industry and promote the competitiveness of the banking industry.
Article 4 The banking regulatory authority shall exercise banking regulation and supervision in accordance with laws and regulations and in line with the principles of openness, fairness and efficiency.
Article 5 The banking regulatory authority and its supervisory staff shall be protected by law while performing supervisory responsibilities in accordance with laws and regulations. There shall be no interference by local governments, government departments at various levels, public organizations or individuals.
Article 6 The banking regulatory authority under the State Council shall establish supervisory information sharing mechanisms with the People’s Bank of China and other regulatory authorities under the State Council.
Article 7 The banking regulatory authority under the State Council may establish supervisory cooperation mechanisms with the banking supervisory authorities in other countries and regions for the supervision of cross-border banking.
Chapter II The Banking Regulatory Authority
Article 8 The banking regulatory authority under the State Council may, if deemed necessary for performing its responsibilities, set up local offices, and shall exercise centralized oversight of its local offices.
The local offices of the banking regulatory authority under the State Council shall perform supervisory functions as authorized by the banking regulatory authority under the State Council.
Article 9 The supervisory staff of the banking regulatory authority shall have the professional skills and work experiences as required for performing their duties.
Article 10 The staff of the banking regulatory authority shall perform their duties with integrity and in accordance with laws and regulations. They shall not take advantage of their positions to seek inappropriate gains, or concurrently hold a position in enterprises including financial institutions.
Article 11 The staff of the banking regulatory authority shall preserve the confidentiality of information for the State according to applicable laws and regulations, and for the banking institutions subject to their supervision and other parties concerned.
The banking regulatory authority under the State Council shall make relevant arrangements for preserving the confidentiality of information while exchanging supervisory information with the banking supervisory authorities in other countries and regions.
Article 12 The banking regulatory authority under the State Council shall make public its supervisory process and procedures, and put in place a supervisory accountability system and an internal compliance monitoring mechanism.
Article 13 Local governments and relevant government departments at various levels shall cooperate and provide assistance for the banking regulatory authority to exercise its supervisory activities, such as resolving problem banking institutions, and investigating and taking enforcement actions against activities that violate laws and regulations.
Article 14 The banking regulatory authority under the State Council shall be subject to the oversight by relevant government agencies such as the audit institution and supervisory institution under the State Council.
Chapter III Regulatory and Supervisory Responsibilities
Article 15 The banking regulatory authority under the State Council shall, in accordance with applicable laws and administrative regulations, formulate and promulgate supervisory rules and regulations for banking institutions.
Article 16 The banking regulatory authority under the State Council shall, in accordance with the criteria and procedures provided in applicable laws and administrative regulations, authorize the establishment, changes, termination and business scope of banking institutions.
Article 17 The banking regulatory authority under the State Council shall review and assess the source of capital, financial strength, ability to replenish capital and integrity of the shareholders while reviewing the applications for the establishment of a banking institution or changes in the shareholders that hold a certain percentage or more of the total capital or total shares as stipulated in applicable laws and regulations.
Article 18 Products and services offered by a banking institution within its business scope authorized by the banking regulatory authority under the State Council shall, in accordance with applicable regulations, be subject to prior approval of the banking regulatory authority under the State Council or the report for filing requirement. The banking regulatory authority under the State Council shall, in accordance with applicable laws and administrative regulations, make public the products and services that are subject to prior approval or report for filing requirement.
Article 19 Without the authorization of the banking regulatory authority under the State Council, no institution or individuals may establish a banking institution or engage in banking businesses.
Article 20 The banking regulatory authority under the State Council shall conduct fit and proper test for directors and senior managers of banking institutions. For this purpose, the banking regulatory authority under the State Council shall formulate specific rules and procedures on the fit and proper test.
Article 21 Prudential rules and regulations applied to banking institutions may be stipulated in laws or administrative regulations, or formulated by the banking regulatory authority under the State Council in accordance with applicable laws and administrative regulations.
“prudential rules and regulations” referred to in the preceding paragraph shall cover, among others, risk management, internal controls, capital adequacy, asset quality, loan loss provisioning, risk concentrations, connected transactions and liquidity management.
The banking institutions shall observe these prudential rules and regulations.
Article 22 The banking regulatory authority under the State Council shall, within a prescribed period of time, make a decision of approval or rejection in writing in response to the following applications. If a decision of rejection is made, it shall specify the reasons for rejection:
(1)In the case of establishment of a banking institution, within six months from the date of receiving the application documents;
(2)In the case of changes or termination of a banking institution or offering new products or services within the business scope authorized by the banking regulatory authority under the State Council, within three months from the date of receiving the application documents; and
(3)In the case of fit and proper test for directors and senior managers, within one month from the date of receiving the application documents.
Article 23 The banking regulatory authority shall conduct off-site surveillance of the business operations and risk profile of banking institutions. For this purpose, it shall establish a supervisory information system to analyze and assess the risk profile of banking institutions.
Article 24 The banking regulatory authority shall conduct on-site examination of the business operations and risk profile of banking institutions.
The banking regulatory authority shall formulate on-site examination procedures to standardize on-site examination activities.
Article 25 The banking regulatory authority under the State Council shall regulate and supervise banking institutions on a consolidated basis.
Article 26 The banking regulatory authority under the State Council shall respond to the proposals of the people’s Bank of China for the examination of banking institutions within thirty days from the date of receiving the proposals.
Article 27 The banking regulatory authority under the State Council shall establish a rating system and an early warning system for the purpose of supervision of banking institutions, thus, based on the rating and risk profile of banking institutions, determining the frequency and scope of on-site examination as well as other supervisory measures that may be deemed necessary.
Article 28 The banking regulatory authority under the State Council shall establish a system to identify and report emergency situations in the banking sector.
The banking regulatory authority shall, as soon as identified any emergency situations that may result in systemic banking risks, hence causing severe social instability, report to the chief responsible person of the banking regulatory authority under the State Council. The chief responsible person of the banking regulatory authority under the State Council shall, when deemed necessary, report to the State Council while informing relevant government agencies including the People’s Bank of China and Ministry of Finance.
Article 29 The banking regulatory authority under the State Council shall, in collaboration with relevant government agencies including the People’s Bank of China and Ministry of Finance, establish mechanisms to address emergency situations in the banking sector, including formulating contingency plans, designating institutions and staff members, specifying their responsibilities, and stipulating resolution measures and procedures, hence ensuring timely and effective resolution of the emergency situations in the banking sector.
Article 30 The banking regulatory authority under the State Council shall compile and publish statistics and reports of banking institutions in accordance with applicable regulations of the State.
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 filing.
Article 32 The banking regulatory authority under the State Council may engage in the international activities related to banking regulation and supervision.
Chapter IV Supervisory Methods and Procedures
Article 33 The banking regulatory authority shall, for the purpose of performing its responsibilities, have the authority to require banking institutions to submit, in accordance with applicable regulations, balance sheets, income statements, other financial and statistical reports, information concerning business operations and management, and the audit reports prepared by certified public accountants.
Article 34 The banking regulatory authority may take the following measures to conduct on-site examination for the purpose of exercising prudential supervision:
(1)to enter a banking institution for on-site examination;
(2)to interview the staff of the banking institution and require them to provide explanations on examined matters;
(3)to have full access to and make copies of the banking institution’s documents and materials related to the on-site examination, and to seal up documents and materials that are likely to be removed, concealed or destroyed; and
(4)to examine the banking institution’s information technology infrastructure for business operations and management.
The on-site examination shall be subject to prior approval of the chief responsible office of the banking regulatory authority. The on-site examination team shall comprise no less than two examiners, who shall produce their examiner’ certificates and the examination notice upon examination. If the on-site examination team comprises less than two examiners, or the examiners fail to produce their examiner’ certificates or the examination notice upon examination, the banking institutions shall have the right to refuse the examination.
Article 35 The banking regulatory authority may, for the purpose of performing its responsibilities, hold supervisory consultations with the directors and senior managers of a banking institution to inquire about the major activities concerning its business operations and risk management.
Article 36 The banking regulatory authority shall require banking institutions to disclose, in accordance with applicable regulations, to the public reliable information, including, among others, financial reports and statements, risk management policies and procedures, changes in the directors and senior managers and information on other significant matters.
Article 37 When a banking institution fails to meet prudential rules and regulations, the banking regulatory authority under the State Council or its provincial office shall require it to take remedial measures within a prescribed period of time. If the banking institution fails to correct the deficiencies within the prescribed period of time, or the safety and soundness of the banking institution is likely to be severely threatened and the interests of its depositors and other customers are likely to be jeopardized, the banking regulatory authority under the State Council or its provincial office may, subject to the approval of its chief responsible officer, take the following measures depending on the severity of the circumstances:
(1)to suspend part of the businesses of the banking institution and/or withhold approval of new products or services;
(2)to restrict dividend or other payments to shareholders;
(3)to restrict asset transfers;
(4)to order the controlling shareholders to transfer shares or restrict the powers of relevant shareholders;
(5)to order the banking institution to replace the directors and/or senior managers or restrict their powers; and
(6)to withhold approval of branching.
The banking institution shall report to the banking regulatory authority under the State Council or its provincial office once it is restored to meet the prudential rules and regulations after taking corrective measures. The banking regulatory authority under the State Council or its provincial office shall terminate the measures prescribed in the preceding paragraph within three days after the verification of compliance.
Article 38 When a banking institution is experiencing or likely to experience a credit crisis, thereby seriously jeopardizing the interests of depositors and other customers, the banking regulatory authority under the State Council may take over the banking institution or facilitate a restructuring. The take-over or restructuring shall be carried out in accordance with applicable laws and administrative regulations.
Article 39 When a banking institution has been found serious violation of laws and regulations, or significant unsafe or unsound practices, thereby seriously threatening financial order and public interests unless it is closed, the banking regulatory authority under the State Council shall have the authority to close the institution in accordance with applicable laws and regulations.
Article 40 In the case of the take-over, restructuring, or closure of a banking institution, the banking regulatory authority under the State Council shall have the authority to require the directors, senior managers and other staff of the banking institution to perform their duties according to the requirements of the banking regulatory authority under the State Council.
In the course of the take-over, restructuring or liquidation after the closure of a banking institution, the banking regulatory authority under the State Council shall have the authority, subject to the approval of its chief responsible person, to take the following measures against the directors and senior managers directly in charge and other staff directly held responsible:
(1)when the departure from the People’s Republic of China of the directors and senior managers directly in charge and other staff directly held responsible is likely to jeopardize the national interests, the banking regulatory authority under the State Council may request the border control authority to prevent them from leaving the People’s Republic of China; and
(2)to request the judicial authority to prohibit the directors and senior managers directly in charge and other staff directly held responsible from moving or transferring their properties, or establishing other rights on their properties.
Article 41 The banking regulatory authority or its provincial office shall have the authority, subject to the approval of its chief responsible person, to inspect the bank accounts of the banking institution suspected in violation of laws and regulations, and the bank accounts of its staff and connected parties, and may, subject to the approval of its chief responsible person, request the judicial authority to freeze the illegally obtained funds that are suspected to be transferred or concealed.
Article 42 The banking regulatory authority may, subject to approval by the head of the banking regulatory authority at or above the level of municipality, take the following measures to investigate the institutions and individuals suspected of violating the law during its inspection on banking institutions:
(1)to interview relevant institutions and individuals and require them to provide explanations on relevant matters;
(2)to check and make copies of the documents and materials related to financial records or property ownership records; and
(3)to record and keep a file of the documents and materials that are likely to be removed, concealed, destroyed or falsified.
Where the measures prescribed in the preceding paragraphs are being taken, there shall be no less than two investigators, who shall present their legal certificates and the written notification of investigation. Where there are less than two investigators, or no legal certificates and written notification of investigation are presented, the relevant institutions or individuals shall have the right to refuse the investigation. Where the measures are taken according to law, the relevant institutions or individuals shall be cooperative, truthfully disclose the required information and provide relevant documents and materials, and shall not refuse or hamper the investigation or conceal the information.
Chapter V Legal Liability
Article 43 When the supervisory staff of the banking regulatory authority commits any of the following acts, he or she shall be subject to administrative sanctions according to law. If the case constitutes a crime, he or she shall be investigated for criminal liability according to law:
(1)to authorize, in violation of regulations, a banking institution’s establishment, changes, termination, business scope or offering of products or services within its business scope;
(2)to conduct on-site examination of banking institutions in violation of regulations;
(3)to fail to report emergency situations in the banking sector in accordance with Article 28 of this law;
(4)to inspect bank accounts or request freezing of funds in violation of regulations;
(5)to take enforcement actions against a banking institution in violation of regulations;
(6)to investigate the relevant institutions or individuals against Article 42 of this Law; and
(7)other acts such as abuse of power and/or neglect of duties.
The supervisory staff of the banking regulatory authority who commits embezzlement, bribery or divulgence of national, commercial or personal confidential information shall, if the case constitutes a crime, be investigated for criminal liability according to law, and if the case does not constitute a crime, be subject to administrative sanctions according to law.
Article 44 When a banking institution is established, or banking businesses are conducted without the authorization of the banking regulatory authority under the State Council, the banking regulatory authority under the State Council shall have the authority to ban such institution or businesses. If the case constitutes a crime, criminal liability shall be pursued according to law. If the case does not constitute a crime, the banking regulatory authority under the State Council shall confiscate the illegal gains. If the amount of illegal gains exceeds 500,000 yuan, a fine ranging from one to five times the amount of illegal gains shall be imposed. If no illegal gains are involved or the amount of illegal gains is less than 500,000 yuan, a fine ranging from 500,000 yuan to 2,000,000 yuan shall be imposed.
Article 45 When a banking institution commits any of the following acts, the banking regulatory authority under the State Council shall order it to take corrective measures, and, if illegal gains are involved, shall confiscate the illegal gains. If the amount of illegal gains exceeds 500,000 yuan, a fine ranging from one to five times the amount of illegal gains shall be imposed. If no illegal gains are involved, or the amount of illegal gains is less than 500,000 yuan, a fine ranging from 500,000 yuan to 2,000,000 yuan shall be imposed. If the case is particularly serious, or the banking institution fails to make correction within the prescribed period of time, the banking regulatory authority under the State Council may order suspension of business for rectification or revocation of its banking license. If the case constitutes a crime, criminal liability shall be pursued according to law:
(1)to establish a branch without authorization;
(2)to change or terminate business operations without authorization;
(3)to offer a product or service without approval or filing with the banking regulatory authority under the State Council; and
(4)to raise or lower interest rates on deposits or loans in violation of regulations.
Article 46 When a banking institution commits any of the following acts, the banking regulatory authority under the State Council shall order it to take corrective measures, and concurrently impose a fine ranging from 200,000 yuan to 500,000 yuan. If the case is particularly serious, or the banking institution fails to make correction within the prescribed period of time, the banking regulatory authority under the State Council may order suspension of business for rectification or revocation of its banking license. If the case constitutes a crime, criminal liability shall be pursued according to law:
(1)to appoint directors or senior managers without the fit and proper test;
(2)to refuse or obstruct the 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 disclose information to the public in accordance with regulations;
(5)to fail to meet prudential rules and regulations with serious consequences; and
(6)to refuse to take measures as required by Article 37 of this law.
Article 47 When a banking institution fails to submit statements, reports, documents or materials in accordance with regulations, the banking regulatory authority under the State Council shall order it to take corrective measures. If the banking institution fails to make correction within the prescribed period of time, the banking regulatory authority may impose a fine ranging from 100,000 yuan to 300,000 yuan.
Article 48 When a banking institution violates laws, administrative regulations or other national regulations on banking regulation and supervision, the banking regulatory authority may, in addition to the enforcement actions prescribed in Article 43 to Article 46 of this law, take the following measures depending on the severity of the circumstance:
(1)to order the banking institution to impose disciplinary sanctions on the directors and senior mangers directly in charge and other staff directly held responsible;
(2)if the case does not constitute a crime, to issue a disciplinary warning to the directors and senior managers directly in charge and other staff directly held responsible and concurrently impose on them a fine ranging from 50,000 yuan to 500,000 yuan; and
(3) to disqualify the directors and senior mangers directly in charge as being unfit and improper for a specified period of time or for life, and/or to bar the directors and senior mangers directly in charge and other staff directly held responsible from banking for a specified period of time or for life.
Article 49 Anyone who hampers the lawful inspection or investigation conducted by the staff members of the banking regulatory authority shall be subject to penalties by the public security authority; and if his or her behavior constitutes a crime, he or she shall be investigated for criminal liability according to law.
Chapter VI Supplementary Provisions
Article 50 Where the laws and administrative regulations provide otherwise the regulation and supervision of policy banks and asset management companies, these provisions shall prevail.
Article 51 Where the laws and administrative regulations provide otherwise the regulation and supervision of the wholly foreign-funded banking institutions, Sino-foreign joint venture banking institutions and branches of foreign banking institutions that are established in the People’s Republic of China, these provisions shall prevail.
Article 52 This law shall enter into effect as of February 1, 2004.