On September 11, 2013, the China Banking Regulatory Commission (the “CBRC“) promulgated the Implementation Measures on Administrative Licensing Items for Foreign Funded Banks (the “New Measures“), substituting the Implementation Measures on Administrative Licensing Items for Foreign Funded Financial Institutions (the “Old Measures“) promulgated in 2006.
Comparing to the Old Measures, the New Measures have adjusted relevant provisions in compliance with the Administrative Regulations on Foreign Funded Banks and the Implementation Rules of the Administrative Regulations on Foreign Funded Banks. Since the category of foreign invested finance companies providing services to the general public is cancelled, the New Measures removed relevant clauses thereon. In addition, the New Measures have strengthened its coordination with the Administrative Measures for the Qualifications of Directors and Senior Management Personnel of Financial Institutions in the Banking Sector and the like.
The key features of the New Measures are:
- Administrative licensing items which have already been cancelled are removed. In accordance with the past decisions by the State Council on the cancellation and adjustment of items requiring administrative approvals, the New Measures removed the following administrative licensing items which have already been cancelled:
- provision of e-banking services by foreign funded banks;
- provision of debit card services;
- change of operating funds by branches of business operating institutions;
- change of business address;
- establishment of self-servicing banks;
- extension of the preparatory phase, extension of the opening phase, temporary suspension of business, and re-opening after suspension of business of foreign funded banks and their branches;
- receipt of credit assets from the parent bank or affiliates; and
- use of interest bearing assets by branches of foreign banks.
- Procedures for administrative licensing are simplified. For example, the New Measures have narrowed down the scope of approval requirements for the amendment of articles of associations: no approval is required for the amendment of articles of associations if such amendment only relates to the change of name, domicile, equity interests, registered capital or business scope, and such changes have already been approved by CBRC. Instead, the bank may amend its articles of association on its own within 6 months after such changes are approved by CBRC and is only required to record the amended articles of association with CBRC and local CBRC branches.
- The coverage of the New Measures is expanded. In accordance with the Administrative Regulations on Foreign Funded Banks and the Implementation Rules of the Administrative Regulations on Foreign Funded Banks, the New Measures have incorporated administrative licensing items such as local incorporation of a foreign funded bank with legal person status from the existing branches of a foreign bank and provision of RMB services for Chinese citizens by foreign funded bank with legal person status.
- Prudential regulations are strengthened. In respect of the administration of qualifications of directors and senior management personnel, the New Measures have detailed the negative requirements which prevent a candidate from taking the position as the director and senior management personnel of a foreign funded bank. In addition, when temporary delegation is involved, the qualification of the delegated and the maximum time limit (6 months) for delegation are specified in the New Measures so as to protect the foreign funded bank form possible business risks in the course of the substitution of directors and senior management personnel.
- Standards for market access are unified. The conditions, procedures and timings of the following administrative licensing items for foreign funded banks are unified with those for domestic banks by the New Measures to the greatest extent:
- Current provisions of trading derivatives, providing credit card services by foreign funded banks are incorporated into the New Measures in accordance with the Measures for the Supervision and Administration of Credit Card Services of Commercial Banks and the Interim Measures for Administration of Derivative Trading by Financial Institutions in Banking Sector;
- Relevant rules on the issuance of debt instruments and capital supplement instruments by foreign funded banks are incorporated into the New Measures;
- The restriction that a foreign funded bank shall not apply for establishing more than 1 sub-branch in the same city at one time is removed; and
- The minimum requirement for the operating funds of sub-branches of foreign funded banks is removed.
It is our observation that after the implementation and entry into force of the New Measures, the administrative licensing for foreign funded banks will be more standardized and facilitated.