Law of the People’s Republic of China on Commercial Banks
(Adopted at the 13th Meeting of the Standing Committee of the Eighth National People’s Congress on May 10, 1995,
promulgated by Order No. 47 of the President of the People’s Republic of China on May 10, 1995, and amended in accordance with the
Decision of the Standing Committee of the National People’s Congress on Amending the Law of the People’s Republic of China on Commercial
Banks adopted at the Sixth Meeting of the Standing Committee of the Tenth National People’s Congress on December 27, 2003)
Contents
Chapter I General Provisions
Chapter II Establishment and Organizational Structure of Commercial Banks
Chapter III Protection of depositors
Chapter IV Basic Rules for Loans and Other Business Operations
Chapter V Financial Affairs and Accounting
Chapter VI Supervision and Control
Chapter VII Assumption of Control and Termination
Chapter VIII Legal Responsibility
Chapter IX Supplementary Provisions
Chapter I
General Provisions
Article 1 This Law is enacted in order to protect the lawful rights and interests of commercial banks, depositors and other clients,
to standardize the behavior of commercial banks, to raise the quality of credit assets, to strengthen supervision and control, to
ensure the stable and sound operation of commercial banks, to maintain financial order and to promote the development of the socialist
market economy.
Article 2 For the purposes of this Law, the term “commercial banks” means enterprise legal persons that are established in conformity
with this Law and the Company Law of the People’s Republic of China and that take in deposits from the general public, grant loans,
handle settlements, etc.
Article 3 Commercial banks may engage in some or all of the following business operations:
(1) taking in deposits from the general public;
(2) granting short-term, medium-term and long-term loans;
(3) handling domestic and foreign settlements;
(4) handling the acceptance and discounting of negotiable instruments;
(5) issuing financial bonds;
(6) acting as an agent for the issue, honoring and underwriting of government bonds;
(7) buying and selling government bonds and financial bonds;
(8) engaging in interbank lending;
(9) buying and selling foreign exchange and acting as an agent for the purchase and sale of foreign exchange;
(10) engaging in the business of bank cards;
(11) providing letter of credit services and guaranty;
(12) acting as an agent for the receipt and payment of money and acting as an insurance agent;
(13) providing safe deposit box services; and
(14) other business operations as approved by the banking regulatory authority under the State Council.
The scope of business shall be specified in the articles of association of the commercial bank, and submitted to the banking regulatory
authority under the State Council for approval.
Upon approval of the People’s Bank of China, commercial banks may engage in the business of the settlement and sale of foreign exchange.
Article 4 The business operations of commercial banks shall be governed by the principles of safety, liquidity and efficiency.
Commercial banks shall make their own decisions regarding their business operations, take responsibility for their own risks, assume
sole responsibility for their profits and losses and exercise self-restriction.
Commercial banks shall, pursuant to law, conduct business operations without interference from any unit or individual.
Commercial banks shall independently assume civil liability with their entire legal person property.
Article 5 Commercial banks shall adhere to the principles of equality, voluntariness, fairness and good faith in business dealings
with their clients.
Article 6 Commercial banks shall safeguard the lawful rights and interests of depositors against infringement by any unit or individual.
Article 7 In credit transactions, commercial banks shall strictly examine the credit-worthiness of a borrower and implement the system
of guaranty in order to ensure that the loan is recovered on schedule.
Commercial banks shall be protected by law when they recover the principal of loans that have become due and the interest thereon
from the borrowers in accordance with legal provisions.
Article 8 In business transactions, commercial banks shall abide by the relevant provisions of laws and administrative rules and
regulations and may not harm the interests of the State or of the public.
Article 9 In business transactions, commercial banks shall abide by the principle of fair competition and may not engage in illegitimate
competition.
Article 10 Commercial banks shall, in accordance with law, accept supervision and control of the banking regulatory authority under
the State Council, but where laws provide that their relevant business operations shall be subject to supervision and control of
other regulatory departments or bodies, such provisions shall prevail.
Chapter II
Establishment and Organizational Structure of Commercial Banks
Article 11 The establishment of commercial banks shall be subject to examination and approval by the banking regulatory authority
under the State Council.
No unit or individual may engage in commercial banking business such as taking in deposits from the general public, and no unit may
use the word “bank” in its name, without approval of the banking regulatory authority under the State Council.
Article 12 A commercial bank shall meet the following requirements for establishment:
(1) having articles of association that conform to this Law and the Company Law of the People’s Republic of China;
(2) having the minimum amount of registered capital as specified in this Law;
(3) having directors and other senior administrators with the expertise and experience in work commensurate with the positions they
are holding;
(4) having a sound organizational structure and management system; and
(5) having the required place of business, security and precautionary measures and other facilities relevant to it business operations.
The establishment of a commercial bank shall, in addition, meet other requirements of prudence.
Article 13 The minimum amount of registered capital required for the establishment of a national commercial bank shall be RMB one
billion yuan. The minimum amount of registered capital required for the establishment of an urban commercial bank shall be 100 million
yuan, and the minimum amount of registered capital required for the establishment of a rural commercial bank shall be 50 million
yuan. Registered capital shall be paid-up capital.
The banking regulatory authority under the State Council may readjust the minimum amount of registered capital on the basis of the
requirements of prudent supervision and control, however, the readjusted amount may not be lower than the amount specified in the
preceding paragraph.
Article 14 To establish a commercial bank, the applicant shall provide the following documents and information to the banking regulatory
authority under the State Council:
(1) a written application, in which the name, location, registered capital, scope of business, etc. of the proposed commercial bank
are clearly stated ;
(2) a feasibility study; and
(3) other documents and information to be provided as specified by the banking regulatory authority under the State Council.
Article 15 If an application for establishing a commercial bank is found, after examination, to be in conformity with the provisions
of Article 14 of this Law, the applicant shall complete an official application form and provide the following documents and information:
(1) a draft of the articles of association;
(2) the qualification certificates of the director or other senior administrator who is to hold office;
(3) an investment verification certificate issued by a statutory investment verification organization;
(4) a list of the names, capital contributions and shares of shareholders;
(5) credit-worthiness certificates and relevant information concerning the shareholders that hold five percent or more of the registered
capital each;
(6) business policies and plans;
(7) information concerning the place of business, security and precautionary measures and other facilities relevant to business operations;
and
(8) other documents and information as specified by the banking regulatory authority under the State Council.
Article 16 A commercial bank the establishment of which has been approved shall be issued a permit for operation by the banking regulatory
authority under the State Council and, on the strength of such permit, register with the administrative department of industry and
commerce and obtain a business license from it.
Article 17 The organizational form and structure of commercial banks shall be governed by the Company Law of the People’s Republic
of China.
Commercial banks, established prior to the implementation of this Law, that do not entirely conform to the provisions of the Company
Law of the People’s Republic of China in organizational form and structure may continue to be governed by previous regulations.
The date on which the preceding paragraph shall apply to such commercial banks shall be specified by the State Council.
Article 18 A board of supervisors shall be established in a wholly State-owned commercial bank. Measures for forming the board of
supervisors shall be formulated by the State Council.
The board of supervisors shall exercise supervision over the quality of credit assets of the wholly State-owned commercial bank,
its assets-liabilities ratios and maintenance of and increase in the value of State-owned assets, and over the senior administrators
of the commercial bank to see whether they violate any laws, administrative rules and regulations or the articles of association
or commit any acts which harm the interests of the bank.
Article 19 Commercial banks may establish branches within and outside the People’s Republic of China, in light of their needs in
business operations. The establishment of such a branch shall be subject to examination and approval by the banking regulatory authority
under the State Council. The establishment of branches within the People’s Republic of China shall not be restricted by the administrative
division of regions.
When a commercial bank establishes a branch within the People’s Republic of China, it shall allocate operating funds in keeping with
the scale of its business, in accordance with regulations. The sum total of operating funds allocated to all the branches may not
exceed 60 percent of the total amount of the capital of the head office.
Article 20 To establish a branch of a commercial bank, the applicant shall submit the following documents and information to the
banking regulatory authority under the State Council:
(1) a written application, in which the name, amount of operating funds and scope of business of the proposed branch, the location
of the head office and the branch, etc. are clearly stated;
(2) the applicant’s financial and accounting reports of the preceding two years;
(3) the qualification certificates of the senior administrators who are to hold office;
(4) business policies and plans;
(5) information concerning the place of business, security and precautionary measures and other facilities relevant to business operations;
and
(6) other documents and information as specified by the banking regulatory authority under the State Council.
Article 21 A commercial bank’s branch the establishment of which has been approved shall be issued a permit for operation by the
banking regulatory authority under the State Council and, on the strength of such permit, register with the administrative department
of industry and commerce and obtain a business license from it.
Article 22 With respect to their branches, commercial banks shall apply across the board a financial system of centralized accounting
and centralized movement of funds, and of management at different levels.
Branches of commercial banks shall not have the status of a legal person and shall lawfully conduct their business operations within
the scope authorized by their head offices, and their civil liability shall be assumed by their head offices.
Article 23 The banking regulatory authority under the State Council shall announce its approval of the establishment of commercial
banks and their branches.
If a commercial bank or branch thereof fails, without good reason, to commence business more than six months after the date of obtaining
its business license or, after commencing business, suspends business without authorization for six months or more in succession,
the banking regulatory authority under the State Council shall revoke its permit for operation and make it known to the public.
Article 24 A commercial bank shall obtain the approval of the banking regulatory authority under the State Council for making any
of the following changes:
(1) change of name;
(2) change in the registered capital;
(3) change of location of the head office or a branch;
(4) adjustment of the scope of business;
(5) change of shareholders that hold five percent or more of the total amount of capital or shares each;
(6) revision of the articles of association; or
(7) changes in other matters as are governed by the regulations of the banking regulatory authority under the State Council.
When a director or a senior administrator is to be replaced, the qualifications of the substitute for the position shall be submitted
to the banking regulatory authority under the State Council for examination.
Article 25 Division and merger of commercial banks shall be governed by the provisions of the Company Law of the People’s Republic
of China.
Division and merger of commercial banks shall be subject to examination and approval by the banking regulatory authority under the
State Council.
Article 26 Commercial banks shall use their permits for operation in accordance with the provisions of laws and administrative
rules and regulations. Forging, alteration, assigning, leasing out or lending of such permits is prohibited.
Article 27 None of the following persons may serve as a director or a senior administrator of a commercial bank:
(1) persons who have been sentenced to criminal punishment for the crime of embezzlement, bribery, seizure or misappropriation of
property or disruption of the public and economic order, or persons who have been deprived of their political rights
for committing a crime;
(2) directors of companies or enterprises, or factory directors or managers who have been subjected to bankruptcy liquidation
due to mismanagement, and who bear personal liability for the bankruptcy;
(3) legal representatives of companies or enterprises that had their business licenses revoked for breaking law, who bear personal
liability therefor; and
(4) persons with comparatively large amounts of overdue personal debts .
Article 28 Purchase by any unit or individual of five percent or more of the total amount of the shares of a commercial bank shall
be subject to prior approval by the People’s Bank of China.
Chapter III
Protection of Depositors
Article 29 In handling savings deposits for individuals, commercial banks shall adhere to the principles of voluntary deposit, unimpeded
withdrawal, interest payment on deposits and confidentiality for the depositors.
Commercial banks shall have the right to refuse to answer the inquiries into and to refuse to freeze, deduct or transfer an individual’s
savings deposits– as made or requested by any unit or individual, except where otherwise provided for by law.
Article 30 Commercial banks shall have the right to refuse to answer the inquiries into a unit’s deposits by any other unit or individual,
except where otherwise provided for by laws and administrative rules and regulations, and shall have the right to refuse to freeze,
deduct or transfer a unit’s deposits as requested by any other unit or individual, except where otherwise provided
for by law.
Article 31 Commercial banks shall determine the interest rates on deposits in accordance with the upper and lower limits interest
rates on deposits specified by the People’s Bank of China and make them known to the public.
Article 32 Commercial banks shall place a deposit reserve with the People’s Bank of China and maintain sufficient provision for payment,
in accordance with the regulations of the People’s Bank of China.
Article 33 Commercial banks shall guaranty, and may not delay or refuse, payment of the principal of deposits and the interest thereon.
Chapter IV
Basic Rules for Loans and Other Business Operations
Article 34 Commercial banks shall conduct their business of lending in accordance with the needs of the national economic and social
development and under the guidance of the industrial policies of the State.
Article 35 Before granting a loan, commercial banks shall strictly examine the borrower’s purpose for the loan, ability to repay
the loan, method of repayment, etc.
When granting a loan, commercial banks shall implement the system of separating the examination of a loan from the actual provision
of the loan and the system of examination and approval at different levels.
Article 36 To obtain a loan from a commercial bank, a borrower shall provide a guaranty. The commercial bank shall strictly examine
the surety’s ability to repay the loan, the ownership and value of the mortgage or the collateral and the feasibility of realizing
the right of mortgage or right of pledge.
If, after examination and appraisal by a commercial bank, a borrower’s credit is found to be good, and the borrower is deemed truly
able to repay the loan, the borrower need not provide a guaranty .
Article 37 For granting a loan, the commercial bank shall conclude a written contract with the borrower. The contract shall stipulate
the type, purpose, amount and interest rate of the loan, the time limit for repayment, the method of repayment, liability for breach
of contract and other matters deemed necessary by the parties.
Article 38 Commercial banks shall determine loan interest rate in accordance with the upper and lower limits for loan interest rates
prescribed by the People’s Bank of China.
Article 39 When granting a loan, commercial banks shall abide by the following provisions on the control of assets-liabilities ratios:
(1) the capital adequacy ratio may not be lower than 8 percent;
(2) the ratio of the outstanding of loans to the outstanding of deposits may not exceed 75 percent;
(3) the ratio of the balance of floating assets to the balance of floating liabilities may not be lower than 25 percent;
(4) the ratio of the outstanding of loans granted to the same borrower to the balance of the capital of the commercial bank may not
exceed 10 percent; and
(5) other provisions of the banking regulatory authority under the State Council concerning the control of assets-liabilities ratios.
If, after the implementation of this Law, the assets-liabilities ratios of a commercial bank established prior to the implementation
of this Law are found not in conformity with the provisions of the preceding paragraph, the bank shall make it conform to the provisions
of the preceding paragraph within a certain time limit. The specific measures therefor shall be formulated by the State Council.
Article 40 Commercial banks may not grant fiduciary loans to their connections. The conditions for granting secured loans to their
connections may not be more preferential than those for granting the same type of loans to other borrowers.
For the purposes of the preceding paragraph, the term “connections” means:
(1) directors, supervisors, administrators and loan officers of the commercial bank and close relatives of such persons;
(2) companies, enterprises and other economic organizations in which the persons mentioned in the preceding paragraph have invested
or in which they hold senior administrative positions.
Article 41 No unit or individual may forcibly demand a commercial bank to grant a loan or to provide a guaranty. Commercial banks
shall have the right to refuse to grant a loan or to provide a guaranty forcibly demanded by any unit or individual.
Article 42 Borrowers shall repay the loan principal and the interest thereon on schedule.
If a borrower fails to repay a secured loan upon maturity, the commercial bank shall lawfully have the right to require the surety
to repay the loan principal and the interest thereon or the right to preferential compensation in respect of the collateral. Immovable
property or stock rights obtained by a commercial bank through the exercise of the right of mortgage or the right of pledge shall
be disposed of by it within two years from the date it obtains the same.
If a borrower fails to repay a fiduciary loan upon maturity, he shall bear liability in accordance with the provisions of the contract.
Article 43 No commercial banks may, within the territory of the People’s Republic of China, engage in trust investment or securities
business, or invest in immovable property which is not for private use, in non-banking financial institutions or in enterprises,
except where otherwise provided for in the regulations of the State.
Article 44 When handling matters of settlement such as acceptance or remittance of negotiable instruments or entrusted receipt of
payment, etc., commercial banks shall encash the instruments and enter receipts and expenditures in their accounts within the
specified time limits, and may not deliberately delay or withhold payment of bills and negotiable instruments or reject negotiable
instruments in violation of regulations. Regulations relating to the time limits for encashing of instruments and entering
of receipts and expenditures in the accounts shall be announced.
Article 45 To issue financial bonds or to raise loans from outside the People’s Republic of China, commercial banks shall first
submit applications for approval in accordance with the provisions of laws and administrative rules and regulations.
Article 46 Inter-bank lending shall be carried out in adherence to the regulations of the People’s Bank of China. It is forbidden
to use such loans for granting fixed assets loans or making investment.
Funds lent under such loans shall be limited to idle funds that remain after a sufficient reserve against deposit has been retained,
sufficient provision for payment has been made and matured loans from the People’s Bank of China have been repaid. Funds borrowed
under such loans shall be used to make up deficiencies in the settlement of negotiable instruments and in the funds available for
covering remittance differences with correspondent banks and to meet the temporary need for working capital.
Article 47 Commercial banks may not raise or lower interest rates in violation of regulations or use other improper means to take
in deposits or grant loans.
Article 48 Enterprises and institutions may select for themselves the place of business of a commercial bank where to open a basic
account for the day-to-day settlement of account transfers and for cash receipts and payments. They may not open more than one basic
account.
No unit or individual may open an account in the name of an individual to deposit the funds of a unit therein.
Article 49 The business hours of commercial banks shall be such as to be convenient to clients and shall be announced. Commercial
banks shall carry out business during announced business hours; they may not suspend business or shorten their business hours without
authorization.
Article 50 In carrying out business operations and providing services, commercial banks shall charge commissions in accordance with
relevant regulations. The items and rates for such commissions shall be specified by the banking regulatory authority under the State
Council and the People’s Bank of China based on their division of responsibilities, in conjunction with the department of pricing
under the State Council respectively.
Article 51 Commercial banks shall preserve their financial and accounting statements, business contracts and other materials in accordance
with relevant regulations of the State.
Article 52 Employees of commercial banks shall abide by laws and administrative rules and regulations and all other regulations for
the control of business operations; they may not:
(1) use their positions to demand, receive or accept bribes, or receive or accept rebates or commissions of any description in violation
of State regulations;
(2) use their positions to embezzle, misappropriate or seize money belonging to the bank or any client;
(3) practise favoritism towards relatives or friends in granting loans or providing guaranty in violation of regulations;
(4) hold a concurrent position in another economic organization; or
(5) commit other acts in violation of laws, administrative rules and regulations or other regulations for the control of business
operations.
Article 53 No employees of commercial banks may disclose State or business secrets that they come to know during their employment.
Chapter V
Financial Affairs and Accounting
Article 54 Commercial banks shall establish and perfect their own financial and accounting systems in accordance with laws, the uniform
accounting system of the State and the relevant regulations of the banking regulatory authority under the State Council.
Article 55 Commercial banks shall, in accordance with relevant State regulations, truthfully record and give a complete account of
their business activities and financial position, draw up annual financial and accounting reports and, without delay, submit them
to the banking regulatory authority under the State Council, the People’s Bank of China and the department of finance under the State
Council. Commercial banks may not establish any account books in addition to statutory account books.
Article 56 Within three months after the end of every fiscal year, commercial banks shall announce their business results and audit
reports for that year in accordance with the regulations of the banking regulatory authority under the State Council.
Article 57 Commercial banks shall, in accordance with relevant State regulations make allocations to a doubtful account reserve,
in order to set off doubtful accounts.
Article 58 The fiscal year of commercial banks shall commence on January 1 and end on December 31 of the Gregorian calendar.
Chapter VI
Supervision and Control
Article 59 Commercial banks shall, in accordance with relevant regulations, formulate their own operating rules, and establish and
perfect their systems for risk management and internal control.
Article 60 Commercial banks shall establish and perfect their own systems for examination and inspection of deposits, loans, settlements,
doubtful accounts, etc.
Commercial banks shall conduct routine examination, inspection and supervision with respect to their branches.
Article 61 Commercial banks shall, in accordance with relevant regulations, submit to the banking regulatory authority under the
State Council and the People’s Bank of China their balance sheets, profit accounts and other financial, accounting and statistical
statements and information.
Article 62 The banking regulatory authority under the State Council shall have the right at any time to carry out inspection of and
exercise supervision over the deposits, loans, settlements, doubtful accounts, etc. of commercial banks, in accordance with the provisions
of Chapters III, IV and V of this Law. When carrying out inspection and supervision, the inspectors and supervisors shall produce
their lawful identification papers. Commercial banks shall provide financial and accounting information, business contracts and other
information concerning operation and management in compliance with the requirements of the banking regulatory authority under the
State Council.
The People’s Bank of China shall have the power to inspect and supervise the commercial banks in accordance with the provisions of
Articles 32 and 34 of the Law of the People’s Republic of China on People’s Bank of China.
Article 63 Commercial banks shall, according to law, accept supervision by audit institutions through auditing.
Chapter VII
Assumption of Control and Termination
Article 64 When a commercial bank has suffered or will possibly suffer, credit crisis, thereby seriously affecting the interests
of the depositors, the banking regulatory authority under the State Council may assume control over the bank.
The purposes of assumption of control are, through taking such measures as are necessary in respect of the commercial bank over which
control is assumed, to protect the interests of the depositors and to enable the commercial bank to resume normal business. The debtor-creditor
relationship with regard to a commercial bank over which control is assumed shall not change as a result of the assumption of control.
Article 65 The assumption of control shall be decided upon, and its implementation shall be a
