On 2 June 2015, the People’s Bank of China (PBOC) released the Interim Administrative Rules on Large Denomination Certificates of Deposit (in Chinese, 《大额存单管理暂行办法》) (the CD Rules), which came into effect on the same day.

We summarize the key points of the CD Rules below.

Qualified issuers

Under the CD Rules, large denomination certificates of deposit (CDs) must be denominated in Renminbi and issued by banking institutions to investors who are not financial institutions. Such investors may be individuals or institutions.

In order to issue CDs, an issuer must meet the following conditions:

  1. be a member of the Self-Disciplinary Mechanism for the Pricing of Market-Oriented Interest Rates of China;
  2. has put in place internal regulations managing the CDs and have established business management systems for the CDs; and
  3. satisfy other conditions as may be required by PBOC.

How to issue CDs?

Before issuing the first set of CDs each year, the issuer must file its annual issuance plan with PBOC.

CDs may be issued through the issuer’s business outlets and e-banking platform, a third party’s platform and other channels recognized by PBOC. PBOC has authorised China Foreign Exchange Trading System & National Interbank Funding Centre (CFETS) as the third party platform for the issuance of CDs.

  • For CDs issued through a third party’s platform, the issuer must disclose, on the issuer’s official website and the CFETS platform, the terms and conditions of the CDs at least one working day prior to the issue date. The status of the issue must also be disclosed in the same manner on the next working day following the issue date.
  • For CDs issued through the issuer’s business outlets and e-banking platform, the issuer must file the relevant information with PBOC on the next working day following the issue date.

Key elements of CDs

Minimum amount of subscription: The minimum amount of CDs to be subscribed is set at RMB 300,000 for individual investors and RMB 10,000,000 for institutional investors.

Tenor: The tenor of the CDs may be one month, three months, six months, nine months, one year, eighteen months, two years, three years or five years.

Interest rate: Interest rates applicable to CDs are determined by issuers subject to the rules of the Self-Disciplinary Mechanism for the Pricing of Market-Oriented Interest Rates. If the interest rate is fixed, it should take the form of an annual rate of interest to accrue on the face value of the relevant CD. If the interest rate is floating, it has to be based on SHIBOR (i.e. the Shanghai Interbank Offered Rate).

CDs may be pledged as security and, subject to the terms and conditions of the issue, may also be transferred or redeemed prior to maturity.

Public commentary sees the CD Rules as another step forward taken by Chinese regulators to liberalise interest rates in China.