China Banking Regulatory Commission

Decree of China Banking Regulatory Commission

No. 2

The Measures of China Banking Regulatory Commission for the Implementation of Administrative Licensing Matters on Chinese investment
Commercial Banks adopted at the 40th chairmen’s meeting of China Banking Regulatory Commission on November 10, 2005, are hereby promulgated
and shall enter into effect as of the day of February 1, 2006.

Chairman, Liu Mingkang

January 12, 2006

Measures of China Banking Regulatory Commission for the Implementation of Administrative Licensing Matters on Chinese investment Commercial
Banks

Chapter I General Provisions

Article 1

In order to regulate the acts of China Banking Regulatory Commission (hereinafter referred to as the CBRC) and their dispatched offices
in implementing the administrative licensing on Chinese investment commercial banks, make clear the administrative licensing matters,
conditions, operational flows and terms, and protect the legitimate rights and interests of the applicants, according to the Banking
Supervision Law of the People’s Republic of China, the Administrative License Law of the People’s Republic of China, the Law of the
People’s Republic of China on Commercial Banks and other laws, administrative regulations and the relevant decisions of the State
Council, these Measures are formulated.

Article 2

The “Chinese investment commercial banks” mentioned in these Measures shall include the state-owned commercial banks, joint-equity
commercial banks, city commercial banks and urban credit cooperatives joint-equity limited companies, etc.

Article 3

In accordance with the Measures and the Provisions of China Banking Regulatory Commission on the Procedures for the Implementation
of Administrative Licensing, the CBRC and its dispatched offices shall bring into effect the administrative licenses to Chinese investment
commercial banks .

Article 4

The following matters about Chinese investment commercial banks shall be under the control of the administrative licensing of the
CBRC or its dispatched office: the establishment, modification or termination of the institution, the adjustment of the business
range, the addition of new varieties of business, and the qualifications for holding the positions of directors and senior managers,
etc.

Article 5

The applicant shall submit the application documents in the light of the Catalogue and Requirements for the Formats of the Application
Documents for the Administrative Licensing Matters of China Banking Regulatory Commission.

Chapter II Establishment of Institutions

Section I Establishment of Legal Person Institutions of Joint -equity Commercial Banks

Article 6

For the establishment of a legal person institution of a joint -equity commercial bank, an applicant shall meet the conditions as
follows:

(1)

Its articles of association shall accord with the Company Law of the People’s Republic of China (hereinafter referred to as the Company
Law) and the Law of the People’s Republic of China on Commercial Banks (hereinafter refers to as the Law on Commercial Banks);

(2)

Registered capital shall be paid-in registered capital and no less than one billion Yuan or equivalent convertible currency;

(3)

Directors and senior managers who meet the qualification conditions for holding their respective positions are needed as well as qualified
operational personnel familiar with the banking business;

(4)

Right organizational institutions and management systems; and

(5)

A business place, safety protection measures and other relevant facilities suitable for its business operations.

Article 7

For the establishment of a legal person institution of a joint -equity commercial bank, the applicant shall at least meet the following
prudent conditions in addition:

(1)

A good corporate governance structure;

(2)

A right risk management system, and effectively controlling the risks in associated transactions;

(3)

The local people’s government shall not become a shareholder, and not intervene in its daily business operations;

(4)

The qualified foreign institutional investors shall be included in the promoters and shareholders;

(5)

Having a scientific and effective human resources management system as well as professional talents with high qualities;

(6)

Having an effective capital restraint and supplement mechanism; and

(7)

Redounding to dissolve the risks of existing financial institutions and promoting financial stability.

Article 8

As the establishment of a joint -equity commercial bank, eligible promoters shall include such as domestic financial institutions,
overseas financial institutions, domestic non-financial institutions and other promoters recognized by the CBRC.

The “overseas financial institutions” mentioned in the preceding Paragraph shall involve the financial institutions in Hong Kong,
Macao and Taiwan.

Article 9

As a promoter of the legal person institution of a joint -equity commercial bank, a domestic financial institution shall meet the
conditions as follows:

(1)

The capital adequacy ratio of a commercial bank shall not be lower than 8%, and the total amount of capital of a non-bank financial
institution shall not be lower than 10% of the total amount of its risk-weighted assets;

(2)

The balance of its equity investments shall not exceed 50% of its net assets in general ( requirements of combined accounting statements);

(3)

Keeping a favorable balance in the latest 3 accounting years;

(4)

Having a good corporate governance structure, as well as a right and effective internal control system;

(5)

Its main prudent regulatory indices shall meet the regulatory requirements; and

(6)

Other prudent conditions prescribed by the CBRC.

Article 10

As a promoter or strategic investor of the legal person institution of a joint -equity commercial bank, an overseas financial institution
shall meet the conditions as follows:

(1)

In the latest year, its total year-end assets shall be no less than 10 billion US Dollars in general;

(2)

In the latest 2 years, it shall have been appraised as good for its long-term credit by an international rating institution recognized
by the CBRC;

(3)

Keeping a favorable balance in the latest 2 accounting years;

(4)

Its capital adequacy ratio shall reach the average level of capital adequacy ratio for the banking industry at the place of its registration
and shall not be lower than 8%; or the total amount of capital of a non-bank financial institution shall not be lower than 10% of
the total amount of risk-weighted assets is;

(5)

Having a right internal control system;

(6)

The place of its registration shall have a right supervision and management system for the financial institution;

(7)

The country (region), which it is in, shall be in a good economic situation; and

(8)

Other prudent conditions prescribed by the CBRC.

As a promoter or strategic investor of the legal person institution of a joint -equity commercial bank, the overseas financial institution
shall follow the principles of holding shares on the long-term basis, optimizing governance, business cooperation, and competition
withdrawal.

In light of the risk situation of the financial industry and the requirements for the supervision thereof, the CBRC may adjust the
conditions for overseas financial institutions as the promoters prescribed in the preceding Paragraph.

Article 11

The proportion of the shares of a single overseas financial institution as the promoter or strategic investor when investing to a
single Chinese investment commercial bank shall not be more than 20%, and the proportion of the total shares of several overseas
financial institutions as the promoters or strategic investors shall not be more than 25%.

The “proportion of the shares” mentioned in the preceding Paragraph refers to the proportion of the shares held by overseas financial
institutions in the total amount of shares of a Chinese investment commercial bank. The proportion of the shares held by the associated
parties to overseas financial institutions shall be computed together with the overseas financial institutions.

Article 12

As a promoter of the legal person institution of a joint -equity commercial bank, a domestic non-financial institution shall meet
the conditions as follows:

(1)

Having registered at the administrative department for industry and commerce, and owning the legal person qualification;

(2)

Having a good corporate governance structure or an effective organizational management model;

(3)

Having a good social reputation as well as good credit and tax payment records, and repaying the principal and interests of the loans
it owes to the financial institutions on time and in full amount;

(4)

Having a longer period of development and a steady business operational situation;

(5)

Having a stronger management capacity as well as good capital strength;

(6)

Having a good financial situation and having been in a favorable balance in the latest 3 accounting years;

(7)

After the year-end distribution, having the net assets that account for 30% of its total assets (requirements of combined accounting
statements);

(8)

The balance of equity investments shall not be more than 50% of the net assets of the enterprise in general (requirements of combined
accounting statements) except for the investment companies or holding companies prescribed by the State Council;

(9)

Capital sources for buying shares are true and lawful; and

(10)

Other prudent conditions prescribed by the CBRC.

Article 13

An enterprise shall not be a promoter of the legal person institution of a joint -equity commercial bank in any of the circumstances
as follows:

(1)

Having obvious defects in the corporate governance structure or mechanism;

(2)

Having a large number of associated enterprises, complex and obscure in equity relationships, or frequent and abnormal in associated
exchanges;

(3)

Not having a prominent major business, and covering too many industries in its business scope;

(4)

The flow fluctuation of cash is largely influenced by the economic situation;

(5)

The ratio of liabilities or the ratio of financial leverage is higher than the average industry ratio ; and

(6)

Other circumstances that will create significant disadvantage effects to the bank.

Article 14

The establishment of the legal person institution of a joint -equity commercial bank shall include two phases, namely, preparatory
establishment and beginning of business.

Article 15

An application for the preparatory establishment of the legal person institution of a joint -equity commercial bank shall jointly
be submitted to the CBRC by all the promoters for acceptance, examination and decision. The CBRC shall make a written decision on
approval or disapproval within 4 months upon acceptance of the application.

Article 16

The period of preparatory establishment of the legal person institution of a joint -equity commercial bank shall be 6 months as of
the day of the approval decision made. If the preparatory establishment has not been carried out on time, the institution shall submit
an application for postponing the preparatory establishment to the CBRC within 1 month prior to the expiry of the time limit for
preparatory establishment. The CBRC shall make a decision on whether to approve the postponement or not within 20 days as of the
day of receipt of the written application. And the longest period postponed for preparatory establishment shall be 3 months.

Before the expiry of the time limit prescribed in the preceding Paragraph, the preparatory establishment group of the institution
shall submit an application for the beginning of business. If it fails to submit the application within the time limit, the approval
document for preparatory establishment shall be abated and the decision-making organ shall logout the license for preparatory establishment.

Article 17

An application of the legal person institution of a joint -equity commercial bank for the beginning of business shall be submitted
to the CBRC for acceptance, examination and decision. The CBRC shall make a written decision on approval or disapproval within 20
days after acceptance of the application,.

Article 18

After receiving the ratification documents for the beginning of business and obtaining a financial business permit, the legal person
institution of a joint -equity commercial bank shall register at the administrative department for industry and commerce and obtain
a business license.

The legal person institution of a joint -equity commercial bank shall open up its business within 6 months after obtaining the business
license. If it fails to initiate its business within the time limit, the institution shall submit an application for postponing the
beginning of business within 1 month before the expiry of the time limit for the beginning of business, to the CBRC. The CBRC shall
make a decision on whether to approve the postponement or not within 20 days as of the day of receipt of the written application,
and the longest period postponed for the beginning of business shall be 3 months.

If the legal person institution of a joint -equity commercial bank fails to open up its business within the time limit prescribed
in the preceding Paragraph, the ratification documents for the beginning of business shall be abated, and the decision-making organ
shall logout the license for the beginning of business, take back the financial business permit, and make an announcement.

Section II Establishment of Legal Person Institutions of City Commercial Banks

Article 19

The city commercial bank shall be established in a city at or above the prefecture level and meet the conditions as follows:

(1)

Having the articles of association in the light of the Company Law and the Law on Commercial Banks;

(2)

The registered capital shall be no less than 1000 million Yuan and have been paid in, its capital adequacy ratio shall not be lower
than 8%, and its core capital adequacy ratio shall not be lower than 4%;

(3)

The proportion of its badly performing loans shall be no higher than 10%;

(4)

Having senior managers who meet the qualification for holding the positions as well as qualified operational personnel familiar with
the banking business;

(5)

Having a right and effective corporate governance structure and internal control system; and

(6)

The business place, safety protection measures and other relevant facilities suitable for its business operations.

Article 20

An application for establishing the legal person institution of a city commercial bank shall be filed by an urban credit cooperatives
joint–equity limited company after combination and reorganization, and it shall meet the conditions as follows:

(1)

The capital adequacy ratio shall not be lower than 6%, and the core capital adequacy ratio shall not be lower than 3%;

(2)

The proportion of its badly performing loans shall be no higher than 15%, and the total amount of its assets shall be no less than
1.5 billion Yuan;

(3)

Having a good corporate governance structure;

(4)

Having right and effective risk management and internal control systems, and having no serious cases occurred in the latest two years;

(5)

Having a good financial situation and strong profit-making ability. The shareholders’ equities of the former urban credit cooperative
shall be first written off due to its accumulated losses, and the insufficient part shall be complemented by the former shareholders
or the local government in cash. Its per capita assets shall be no less than 6 million Yuan (or 5 million Yuan for an undeveloped
area). The rate of its year-end asset expenses in the latest year before the application is submitted shall be lower than 1.35% in
general, and the rate of its asset profits shall not be lower than 0.2% in general, and the rate of its capital profits shall not
be higher than 8% (the premise for the calculation of profits shall be the sufficient reserves for the losses incurred from all kinds
of loans in that year), and the rate of interests reclaim shall not be lower than 80%;

(6)

Its liquidity ratio, ration of deposits and loans, ration of provisions and other indices shall meet the relevant supervisory requirements;
and

(7)

Having withdrawn sufficient reserves for losses.

Article 21

Establishing a city commercial bank; there shall be eligible promoters that may include: domestic financial institutions, domestic
non-financial institutions, overseas financial institutions and other promoters as recognized by the CBRC. A promoter shall follow
the conditions prescribed in Articles 9 through 13 of these Measures.

Article 22

The establishment of the juridical person institution of a city commercial bank shall include two stages, namely, preparatory establishment
and beginning of the business.

Article 23

An application for the preparatory establishment of the legal person institution of a city commercial bank shall be followed with
the acceptance and preliminary examination of the banking regulatory bureau at the locality where the commercial bank is to be established,
and the examination and decision shall be made by the CBRC. The CBRC shall make a written decision on approval or disapproval within
4 months upon receipt of the entire application documents.

Article 24

The period of preparatory establishment of the legal person institution of a city commercial bank shall be 6 months as of the day
when the decision on approval is made. If the preparatory establishment has not been implemented on time, within 1 month prior to
the expiry of the time limit for preparatory establishment, an application for postponing the preparatory establishment shall be
submitted by the institution to the banking regulatory bureau. The banking regulatory bureau shall make a decision on whether to
approve the postponement or not within 20 days as of the day of receipt of the written application, and the longest period postponed
for preparatory establishment shall be 3 months.

Before the expiry of the time limit prescribed in the preceding Paragraph, the preparatory establishment group of the institution
shall submit an application for the opening of business. If the application fails to be submitted within the time limit, the approval
documents for preparatory establishment shall be abated, and the decision-making organ shall logout the license for preparatory establishment.

Article 25

An application of the legal person institution of a joint -equity commercial bank for the beginning of its business shall be submitted
to the local banking regulatory bureau for acceptance, examination and decision. The banking regulatory bureau shall make a written
decision on approval or disapproval within 2 months after acceptance of the application, and send a copy to the CBRC.

Article 26

After receiving the ratification document for the beginning of business and obtaining a financial business permit, the legal person
institution of a city commercial bank shall register at the administrative department for industry and commerce and obtain a business
license.

The legal person institution of a city commercial bank shall open up its business within 6 months after obtaining the business license.
If the institution fails to open up its business within the time limit, it shall submit an application for postponing the beginning
of business to the CBRC within 1 month prior to the expiry of the time limit for the beginning of business. The CBRC shall make a
decision on whether to approve the postponement or not within 20 days as of receipt of the written application, and the longest period
postponed for the beginning of business shall be 3 months.

If the legal person institution of a city commercial bank fails to open up its business within the time limit prescribed in the preceding
Paragraph, the ratification documents for the beginning of business shall be abated, and the decision-making organ shall logout the
license for the beginning of business, take back the financial business permit and make an announcement.

Section III Establishment of Urban Credit Cooperatives Joint–equity Limited Companies

Article 27

The “establishment of an urban credit cooperatives joint–equity limited company” means that, on the basis of willingness and in the
light of the Company Law, an enterprise legal person which is established upon reorganization and merge of several or one city credit
cooperative(s) within a same city , absorbs public savings, grants loans and handles settlement businesses. This enterprise legal
person shall be a local banking financial institution in the form of joint–equity limited company.

Article 28

For the establishment of an urban credit cooperative joint–equity limited company, the applicant shall meet the conditions as follows:

(1)

Having the articles of association in the light of the Company Law and the Law on Commercial Banks;

(2)

The registered capital shall be no less than 50 million Yuan, which has been paid in, its capital adequacy ratio shall not be lower
than 8%, and its core capital adequacy ratio shall not be lower than 4%;

(3)

The proportion of its badly performing loans shall be no higher than 15%;

(4)

Having senior managers who own the qualification for holding their respective positions as well as qualified operational personnel
familiar with the banking business;

(5)

Having right organizational institutions and management systems; and

(6)

Having business place, safety protection measures and other relevant facilities suitable for its business operations; and

(7)

Other prudent conditions prescribed by the CBRC.

Article 29

All the urban credit cooperatives that participate in the establishment of an urban credit cooperatives joint–equity limited company
shall be subject to the consolidated calculation of financial statements, and shall meet the conditions as follows:

(1)

The capital adequacy ratio shall not be lower than 6%, and the core capital adequacy ratio shall not be lower than 3%;

(2)

The quality situation of asset shall be good, and the proportion of badly performing loans shall be no higher than 18%;

(3)

The situation of profit-making shall be good. The per capita assets shall not be lower than 5 million Yuan. The rate of year-end asset
profits for the latest year before the application is submitted shall not be lower than 0.2% in general, the rate of capital profits
shall not be lower than 4% in general, and the rate of interests recovery not higher than 80%; and

(4)

Having a good liquidity situation. And the liquidity ratio, ration of deposits and loans, ration of provisions and other indices shall
meet the relevant supervisory requirements.

Each urban credit cooperative shall also meet other prudent conditions prescribed by the CBRC.

Article 30

The shareholders of the urban credit cooperative that has participated in the establishment of an urban credit cooperatives joint–equity
limited company may be as the promoters of the urban credit cooperatives joint–equity limited company.

For the establishment of an urban credit cooperative joint–equity limited company, the promoters may also be the domestic financial
institutions, domestic non-financial institutions, overseas financial institutions and other promoters recognized by the CBRC. The
aforesaid promoters shall meet the conditions prescribed in Articles 9 through 13 of these Measures, but the total year-end assets
of an overseas financial institution for the latest year shall not be less than one billion US Dollars in general.

Article 31

The establishment of an urban credit cooperatives joint–equity limited company shall include two stages, namely, preparatory establishment
and beginning of the business.

Article 32

An application for the preparatory establishment of an urban credit cooperatives joint–equity limited company shall be subject to
the acceptance and preliminary examination of the local banking regulatory bureau, and the examination and decision shall be made
by the CBRC. The banking regulatory bureau shall seek for the supervisory opinions of the banking regulatory sub-bureau at the locality
where the urban credit cooperatives joint–equity limited company is to be established. The CBRC shall make a written decision on
approval or disapproval within 4 months after receipt of the entire application documents.

Article 33

The period of preparatory establishment of an urban credit cooperative joint–equity limited company shall be 6 months as of the day
when the decision on approval is made. If the preparatory establishment has not been implemented on time, the institution shall submit
an application for postponing the preparatory establishment to the banking regulatory bureau within 1 month prior to the expiry of
the time limit for preparatory establishment. The banking regulatory bureau shall make a decision on whether to approve or disapprove
within 20 days as of receipt of the written application, and the longest period postponed for preparatory establishment shall be
3 months.

Before the expiry of the time limit prescribed in the preceding Paragraph, the preparatory establishment group of the institution
shall submit an application for the beginning of business. If an application fails to be submitted within the time limit, the approval
document for preparatory establishment shall be abated, and the decision-making organ shall logout the license for preparatory establishment.

Article 34

An application of an urban credit cooperatives joint–equity limited company for the beginning of its business shall be submitted
to the local banking regulatory bureau for acceptance and decision. The banking regulatory bureau shall make a written decision on
approval or disapproval within 2 months upon acceptance of the application, and send a copy to the local banking regulatory sub-bureau.

Article 35

After receiving the ratification documents for the beginning of business and obtaining a financial business permit, an urban credit
cooperatives joint–equity limited company shall register at the administrative department for industry and commerce and obtain a
business license.

Within 6 months after obtaining the business license, the urban credit cooperatives joint–equity limited company shall open up its
business. If the institution fails to open up its business within the time limit, the applicant shall submit an application for postponing
the beginning of business to the banking regulatory bureau within 1 month prior to the expiry of the time limit for the beginning
of business. The banking regulatory bureau shall make a decision on whether to approve the postponement or not within 20 days as
of the day of receipt of the written application, and the longest period postponed for the beginning of business shall be 3 months.

If the urban credit cooperatives joint–equity limited company fails to open up its business within the time limit as prescribed in
the preceding Paragraph, the original ratification documents for the beginning of business shall be abated, and the decision-making
organ shall logout the license for the beginning of business, take back the financial business permit and make an announcement.

Section IV Establishment of Domestic Branches

Article 36

The domestic branches established by Chinese investment commercial banks shall include the branches, branch-level exclusive institutions,
sub-branches and facilities of self-service banks, etc.

Article 37

If a state-owned commercial bank or joint -equity commercial bank applies for establishing a branch, the applicant shall meet the
conditions as follows:

(1)

Having a good corporate governance structure;

(2)

Having sound and effective risk management and internal control systems;

(3)

Having an effective information management system;

(4)

Its capital adequacy ratio, ration of badly performing loans, profit-making ability and other important supervisory indices shall
meet the supervisory requirements;

(5)

Having the ability to apportion the working capital: the apportioned working capital shall be no less than 100 million Yuan or equivalent
convertible currency, and the total amount of the working capital apportioned to all the branches shall not exceed 60% of the net
capital of the applicant;

(6)

Having committed no serious cases or no serious illegal or rule-breaking acts within the latest 2 years;

(7)

Having a good risk rating conclusion; and

(8)

Other prudent conditions prescribed by the CBRC.

Article 38

If a state-owned commercial bank or joint -equity commercial bank applies for establishing bankcard centers, instruments centers,
capital operating centers or other branch-level exclusive institutions, the applicant shall meet the conditions as follows:

(1)

The management system reform for exclusive business operations shall accord with the development trends of these business operations;

(2)

The management system reform for exclusive business operations shall accord with the overall strategies and development plans of the
general office, and shall benefit the enhancement of the whole competitiveness;

(3)

Having good corporate governance, its internal control shall be sound and effective, and its main prudent supervision indices accord
with the supervisory requirements of the CBRC;

(4)

Its exclusive business operations shall have been opened up for more than two years, have a certain scale and have accumulated certain
experiences;

(5)

The quality of its assets for exclusive business operations, the profit-making ability and other indi