MEASURES OF CHINA BANKING REGULATORY COMMISSION FOR THE IMPLEMENTATION OF ADMINISTRATIVE LICENSING MATTERS CONCERNING COOPERATIVE FINANCIAL INSTITUTIONS

China Banking Regulatory Commission

Order of China Banking Regulatory Commission

No. 3

The “Measures of China Banking Regulatory Commission for the Implementation of Administrative Licensing Matters Concerning Cooperative
Financial Institutions”, which were adopted at the 40th chairman’s meeting of China Banking Regulatory Commission on November 10,
2005, are hereby promulgated, and shall come into force on February 1, 2006.

Chairman Liu Mingkang

January 12, 2006

Measures of China Banking Regulatory Commission for the Implementation of Administrative Licensing Matters Concerning Cooperative
Financial Institutions

Chapter I General Provisions

Article 1

The present measures are formulated in accordance with the “Law of the People’s Republic of China on the Regulation of the Banking
Industry”, the “Administrative License Law of the People’s Republic of China”, the “Law of the People’s Republic of China on Commercial
Banks” as well as other laws, administrative regulations, and the relevant decisions of the State Council for the purpose of regulating
China Banking Regulatory Commission (hereinafter referred to as CBRC) and its dispatched offices in their granting administrative
licenses to cooperative financial institutions, clarifying the administrative licensing matters, conditions, applicable operational
flows and term, and protecting the lawful rights and interests of the applicants.

Article 2

Cooperative financial institutions as mentioned in the present measures shall include: rural credit cooperatives, associate rural
credit cooperative unions of the counties (cities, districts), rural credit cooperative unions of the counties (cities, districts),
associate rural credit cooperative unions of the prefectures (cities), associate rural credit cooperative unions of the provinces
(autonomous regions, municipalities directly under the Central Government), rural cooperative banks, and rural commercial banks.

Article 3

CBRC and its dispatched offices shall comply with the present measures and the “Provisions of China Banking Regulatory Commission
on the Procedures for Granting Administrative Licenses” when granting administrative licenses to cooperative financial institutions.

Article 4

The following matters of a cooperative financial institution shall be subject to administrative license of CBRC or its dispatched
office: establishment, modification or termination of the institution, adjustment of the business scope, addition of new varieties
of business, qualifications for holding the positions of council members (directors) and senior managers, and so on.

Article 5

An applicant shall submit the application materials in accordance with the “Catalogue of China Banking Regulatory Commission on Application
Materials for Administrative Licensing Matters and the Format Requirements”.

Chapter II Establishment of Legal Person Institutions

Section 1 Establishment of Rural Credit Cooperatives

Article 6

For the establishment of a rural credit cooperative, the applicant shall meet the following conditions:

(1)

It has the articles of association conforming to the provisions of CBRC;

(2)

It is established by means of initiation and there shall be no less than 500 initiators;

(3)

The minimum amount of registered capital shall be RMB 1 million Yuan, which shall be paid-in capital;

(4)

It has council members and senior managers who meet the qualification conditions for holding their respective positions;

(5)

There are no less than 2 persons who hold the positions of director general and vice director general(s);

(6)

No less than 80% of practitioners have engaged in financial work for at least 1 year or have the technical secondary school diploma
or above majoring in finance or similar field;

(7)

It has a sound organizational structure and management rules; and

(8)

It has qualified business place, safety protection measures and other relevant facilities for its business.

Article 7

For the establishment of a rural credit cooperative, the applicant shall meet the following conditions on prudence in addition:

(1)

It has a sound risk management system, and is capable of effectively controlling the risks in associated transactions;

(2)

It has scientific and effective human resources management rules, and has professional talents with high qualities;

(3)

It has an effective capital restraint and supplement mechanism;

(4)

It contain no shares held by the local people’s government in the form of fiscal funds; and

(5)

Other conditions on prudence as prescribed by CBRC.

Article 8

For the establishment of a rural credit cooperative, there shall be qualified initiators. Such initiators may include: natural persons,
domestic non-financial institutions, domestic financial institutions, overseas financial institutions and other initiators acknowledged
by CBRC.

The expression “overseas financial institutions” as mentioned in the preceding paragraph shall include the financial institutions
from Hong Kong, Macao and Taiwan regions.

Article 9

A natural person initiator shall meet the following conditions:

(1)

He has full capacity for civil conduct;

(2)

He has good social prestige as well as honesty and credibility records;

(3)

His share funds are owned by himself and the sources are lawful, and he shall not hold shares by contributing loans or contributing
funds commissioned by others;

(4)

He is a resident of the locality of the rural credit cooperative to be established, or a non-local resident who has a fixed domicile
at the said locality and has resided for at least 3 years; and

(5)

Other conditions on prudence as prescribed by CBRC.

Article 10

The proportion of the shares of a single natural person shall not exceed 2%, and the proportion of the total shares of employees shall
not exceed 25%.

Article 11

As an initiator, a domestic non-financial institution shall meet the following conditions:

(1)

It has been registered in the administrative department for industry and commerce, and has the status as a legal person;

(2)

It has good social prestige, honesty and credibility records, as well as tax payment records;

(3)

It is in good financial situation, and made profits continuously in the latest 2 accounting years;

(4)

It has strong management capabilities and fund strength;

(5)

After the year-end distribution of profits, its net assets reach 30% of the total assets or even higher (by standard of consolidated
accounting statements);

(6)

The balance of its equity investments shall generally not exceed 50% of its net assets (including the amount of current investments,
by standard of consolidated accounting statements);

(7)

His share funds are owned by himself and the sources are lawful, and he shall not hold shares by contributing loans or contributing
funds commissioned by others;

(8)

Its place of registration is within the jurisdiction of the rural credit cooperative to be established; and

(9)

Other conditions on prudence as prescribed by CBRC.

Article 12

The proportion of the total shares of a single domestic non-financial institution and its associated parties shall not exceed 10%.

Article 13

As an initiator, a domestic financial institution shall meet the following conditions:

(1)

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

(2)

The balance of its equity investments shall not exceed 50% of its net assets (including the amount of current investments, by standard
of consolidated accounting statements);

(3)

It made profits continuously in the latest 2 accounting years;

(4)

It has good corporate governance, as well as sound and effective internal control rules;

(5)

Its main prudent regulatory indices meet the regulatory requirements; and

(6)

Other conditions on prudence as prescribed by CBRC.

None of the associate rural credit cooperative unions of the provinces (autonomous regions, municipalities directly under the Central
Government), associate rural credit cooperative unions of the prefectures (cities), or associate rural credit cooperative unions
of the counties (cities, districts) may hold shares of a rural credit cooperative.

Article 14

The proportion of the total shares of a single domestic financial institution and its associated parties shall not exceed 20%.

Article 15

As an initiator, an overseas financial institution shall meet the following conditions:

(1)

Its total year-end assets in the latest year shall generally be no less than 1,000 million USD;

(2)

If it is an international rating institution acknowledged by CBRC, its long-term credit was rated by CBRC as good in the latest 2
years;

(3)

It has been 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 sector at the place of its registration
and shall not be lower than 8% if it is a bank, or the total amount of its capital shall not be lower than 10% of the total amount
of risk-weighted assets if it is a non-bank financial institution;

(5)

It has sound internal control rules;

(6)

The financial institution at the place of registration has sound supervision and management rules;

(7)

Its home country (region) is in good economic situation; and

(8)

Other conditions on prudence as prescribed by CBRC.

CBRC may, when required by the risk situation of the financial industry and the supervision thereof, adjust the conditions for overseas
financial institutions to hold the shares.

Article 16

The proportion of the shares held by a single overseas financial institution in a single rural credit cooperative shall not exceed
20%. The proportion of the total shares of more than one overseas financial institution shall not exceed 25%.

The expression “proportion of the shares” as mentioned in the preceding paragraph shall refer to the proportion of the total shares
held by an overseas financial institution in a rural credit cooperative. The proportion of shares held by an associated party of
the overseas financial institution shall be counted into that of the overseas financial institution.

Article 17

The establishment of a rural credit cooperative shall include two stages, namely, preparatory establishment and initiation of the
business.

For the establishment of a rural credit cooperative, a preparatory establishment team shall be formed, and the initiators of the rural
credit cooperative shall entrust the preparatory establishment team as the applicant.

Article 18

The application for preparatory establishment of a rural credit cooperative within the jurisdiction of a banking regulatory branch
office of China Banking Regulatory Commission (hereinafter referred to as banking regulatory branch office) shall be subject to the
acceptance and preliminary examination of the banking regulatory branch office, and be subject to the examination of the supervisory
office of China Banking Regulatory Commission (hereinafter referred to as banking regulatory office) for decision. The banking regulatory
office shall, within 4 months as of receipt of the entire application materials, make a written decision on approval or disapproval.

The application for the preparatory establishment of a rural credit cooperative within the jurisdiction of the city where the banking
regulatory office is located shall be subject to the acceptance and examination of the banking regulatory office for decision. The
banking regulatory office shall, within 4 months as of the acceptance, make a written decision on approval or disapproval.

Article 19

The term of preparatory establishment of a rural credit cooperative shall be 6 months as of the day when the decision on approval
is made. In the case of any particular circumstance, the applicant shall, within 1 month prior to expiry of the time limit for preparatory
establishment, submit the application for postponing the preparatory establishment to the banking regulatory office. The banking
regulatory office shall, within 20 days as of receipt of the written application, make a decision on whether to approve the postponement
or not, and the maximum period postponed for preparatory establishment shall be 3 months.

The applicant shall, prior to the expiry of the time limit prescribed in the preceding paragraph, submit the application for the initiation
of business. If it fails to submit the application within the time limit, the deciding organ shall nullify the license for preparatory
establishment, and take back the approval document for preparatory establishment.

Article 20

The application of a rural credit cooperative within the jurisdiction of a banking regulatory branch office for the initiation of
business, shall be subject to the acceptance and preliminary examination of the banking regulatory branch office, and be subject
to the examination of the banking regulatory office for decision. The banking regulatory office shall, within 2 months as of receipt
of the entire application materials, make a written decision on ratification or refusal.

The application of a rural credit cooperative within the jurisdiction of the city where the banking regulatory office is located for
the initiation of business, shall be subject to the acceptance and examination of the banking regulatory office for decision. The
banking regulatory office shall, within 2 months as of the acceptance, make a written decision on ratification or refusal.

Article 21

A rural credit cooperative shall, after receiving the ratification document for the initiation of business and obtaining a financial
business permit, go to the administrative department for industry and commerce to apply for a business license.

A rural credit cooperative shall initiate the business within 6 months as of obtaining the business license. In the case of any particular
circumstance, the applicant shall, within 1 month prior to the expiry of the time limit for the initiation of business, submit the
application for postponing the initiation of business to the banking regulatory office. The banking regulatory office shall, within
20 days as of receipt of the written application, make a decision on whether to approve the postponement or not, and the maximum
period postponed for the initiation of business shall be 3 months.

Where a rural credit cooperative fails to initiate the business within the time limit as prescribed in the preceding paragraph, the
deciding organ shall nullify the license for the initiation of business, take back the ratification document for the initiation of
business and the financial business permit, and make an announcement.

Section 2 Establishment of Rural Associate Credit Cooperative Unions of Counties (Cities, Districts)

Article 22

For the establishment of an associate rural credit cooperative union of a county (city, district), the applicant shall meet the following
conditions:

(1)

It has the articles of association conforming to the provisions of CBRC;

(2)

The associate union is established by means of initiation and there are no less than 8 rural credit cooperatives within the jurisdiction;

(3)

The minimum amount of its registered capital is RMB 1 million Yuan, which shall be paid-in capital;

(4)

It has council members and senior managers who meet the qualification conditions for holding their respective positions;

(5)

There are no less than 2 persons who hold the positions of director general and vice director general(s);

(6)

No less than 80% of practitioners have engaged in financial work for at least 1 year or have the technical secondary school diploma
or above majoring in finance or similar field;

(7)

It has a sound organizational structure and management rules; and

(8)

It has qualified business place, safety protection measures and other relevant facilities for its business.

Article 23

For the establishment of an associate rural credit cooperative union of a county (city, district), the applicant shall meet the following
conditions on prudence in addition:

(1)

It has a good corporate governance structure;

(2)

It has a sound risk management system, and is capable of effectively controlling the risks in associated transactions;

(3)

It has scientific and effective human resources management rules, and has professional talents with high qualities;

(4)

It has an effective capital restraint and supplement mechanism;

(5)

It contains no shares held by the local people’s government in the form of fiscal funds; and

(6)

Other conditions on prudence as prescribed by CBRC.

Article 24

For the establishment of an associate rural credit cooperative union of a county (city, district), there shall be qualified initiators,
and the initiators shall be rural credit cooperatives within the jurisdiction.

The employees of an associate rural credit cooperative union of a county (city, district) may hold shares by centralizing their funds.

None of the associate rural credit cooperative unions of the provinces (autonomous regions, municipalities directly under the Central
Government), or associate rural credit cooperative unions of the prefectures (cities) shall hold shares of an associate rural credit
cooperative union of a county (city, district).

Article 25

As an initiator, a rural credit cooperative shall meet the following conditions:

(1)

The place of registration is located within the jurisdiction of the associate rural credit cooperative union of the county (city,
district) to be established;

(2)

The balance of its equity investments shall not exceed 50% of its net assets (including the amount of current investments); and

(3)

Other conditions on prudence as prescribed by CBRC.

Article 26

A single rural credit cooperative shall hold no less than 50,000 shares, and the proportion of its shares shall not exceed 20%.

Article 27

Any of the employees of a shareholding associate rural credit cooperative union of a county (city, district) shall meet the following
conditions:

(1)

He has full capacity for civil conduct;

(2)

His share funds are owned by himself and the sources are lawful, and he shall not hold shares by contributing loans or contributing
funds commissioned by others; and

(3)

Other conditions on prudence as prescribed by CBRC.

Article 28

The proportion of the shares of a single employee shall not exceed 2%, and the proportion of the total shares of all employees shall
not exceed 25%.

Article 29

The establishment of an associate rural credit cooperative union of a county (city, district) shall include two stages, namely, preparatory
establishment and initiation of the business.

For the establishment of an associate rural credit cooperative union of a county (city, district), a preparatory establishment team
shall be formed, and the initiators of the associate rural credit cooperative union of the county (city, district) shall entrust
the preparatory establishment team as the applicant.

Article 30

The application of an associate rural credit cooperative union of a county (city, district) within the jurisdiction of a banking regulatory
branch office for preparatory establishment shall be subject to the acceptance and preliminary examination of the banking regulatory
branch office, and shall be subject to the examination of the banking regulatory office for decision. The banking regulatory office
shall, within 4 months as of receipt of the entire application materials, make a written decision on approval or disapproval.

The application for preparatory establishment of an associate rural credit cooperative union of a county (city, district) within the
jurisdiction of the city where the banking regulatory office is located, shall be subject to the acceptance and examination of the
banking regulatory office for decision. The banking regulatory office shall, within 4 months as of the acceptance, make a written
decision on approval or disapproval.

Article 31

The term of preparatory establishment of an associate rural credit cooperative union of a county (city, district) shall be 6 months
as of the day when the decision on approval is made. In the case of any particular circumstance, the applicant shall, within 1 month
prior to expiry of the time limit for preparatory establishment, submit to the banking regulatory office the application for postponing
the preparatory establishment. The banking regulatory office shall, within 20 days as of receipt of the written application, make
a decision on whether to approve the postponement or not, and the maximum period postponed for preparatory establishment shall be
3 months.

The applicant shall, prior to the expiry of the time limit prescribed in the preceding paragraph, submit the application for the initiation
of business. If it fails to submit the application within the time limit, the deciding organ shall nullify the license for preparatory
establishment, and take back the approval document for the preparatory establishment.

Article 32

The application of an associate rural credit cooperative union of a county (city, district) within the jurisdiction of a banking regulatory
branch office for the initiation of business shall be subject to the acceptance and preliminary examination of the banking regulatory
branch office, and be subject to the examination of the banking regulatory office for decision. The banking regulatory office shall,
within 2 months as of receipt of the entire application materials, make a written decision on ratification or refusal.

The application of an associate rural credit cooperative union of a county (city, district) within the jurisdiction of the city where
the banking regulatory office is located for the initiation of business, shall be subject to the acceptance and examination of the
banking regulatory office for decision. The banking regulatory office shall, within 2 months as of the acceptance, make a written
decision on ratification or refusal.

Article 33

An associate rural credit cooperative union of a county (city, district) shall, after receiving the ratification document for the
initiation of business and obtaining a financial business permit, go to the administrative department for industry and commerce to
obtain a business license.

An associate rural credit cooperative union of a county (city, district) shall initiate the business within 6 months as of obtaining
a business license. In the case of any particular circumstance, the applicant shall, within 1 month prior to the expiry of the time
limit for the initiation of business, submit an application for postponing the initiation of business to the banking regulatory office.
The banking regulatory office shall, within 20 days as of receipt of the written application, make a decision on whether to approve
the postponement or not, and the maximum period postponed for the initiation of business shall be 3 months.

Where the associate rural credit cooperative union of the county (city, district) fails to initiate the business within the time limit
as prescribed in the preceding paragraph, the deciding organ shall nullify the license for the initiation of business, take back
the ratification document for the initiation of the business and the financial business permit, and make an announcement.

Section 3 Establishment of Rural Credit Cooperatives of Counties (Cities, Districts)

Article 34

For the establishment of a rural credit cooperative of a county (city, district), the applicant shall meet the following conditions:

(1)

It has the articles of association conforming to the provisions of CBRC;

(2)

It is established by means of initiation and there shall be no less than 1,000 initiators;

(3)

Its registered capital shall be RMB 10 million Yuan or more;

(4)

It has council members and senior managers who meet the qualification conditions for holding their respective positions;

(5)

There are no less than 2 persons who hold the positions of director general and vice director general(s);

(6)

No less than 80% of practitioners have engaged in financial work for at least 1 year or have the technical secondary school diploma
or above majoring in finance or similar field;

(7)

It has a sound organizational structure and management rules; and

(8)

It has qualified business place, safety protection measures and other relevant facilities for its business.

The banking regulatory office may, in light of the actual situation of the locality of the rural credit cooperative union of the county
(city, district) to be established, make a proper adjustment to the registered capital in Item (3) of the preceding paragraph, provided
that the amount of registered capital shall not be less than RMB 5 million Yuan.

Article 35

For the establishment of a rural credit cooperative union of a county (city, district), the applicant shall meet the following conditions
on prudence in addition:

(1)

It has a good corporate governance structure;

(2)

It has a sound risk management system, and is capable of effectively controlling the risks in associated transactions;

(3)

It has scientific and effective human resources management rules, and has professional talents with high qualities;

(4)

It has an effective capital restraint and supplement mechanism;

(5)

It contains no shares held by the local people’s government in the form of fiscal funds; and

(6)

Other conditions on prudence as prescribed by CBRC.

For the establishment of a rural credit cooperative union of a county (city, district) by means of consolidation, the applicant shall
meanwhile meet the following conditions in addition:

(1)

Both the rural credit cooperative and the associate rural credit cooperative union of the county (city, district) participate in the
establishment voluntarily;

(2)

The associate rural credit cooperative union of the a county (city, district) has strong management capabilities;

(3)

The rural credit cooperative and the associate rural credit cooperative union of the county (city, district) make an estimation according
to consolidated financial statements, which shows that it is solvent;

(4)

Its core capital adequacy ratio shall be no lower than 2%, and may continue to be raised after establishment.

Article 36

For the establishment of a rural credit cooperative union of a county (city, district), there shall be qualified initiators. The initiators
may include: natural persons, domestic non-financial institutions, domestic financial institutions, overseas financial institutions,
and other initiators acknowledged by CBRC.

Article 37

The initiators shall conform to the provisions in Article 9 and Articles 11 through 16 of the present measures.

The proportion of the shares of a single natural person shall not exceed 5￿￿the proportion of the total shares of the employees
shall not exceed 25%, and the proportion of the total shares of all natural persons shall be no less than 50%.

None of the associate rural credit cooperative unions of the provinces (autonomous regions, municipalities directly under the Central
Government), or of the associate rural credit cooperative unions of the prefectures (cities) shall hold shares of a rural credit
cooperative union of a county (city, district).

Article 38

The establishment of a rural credit cooperative union of a county (city, district) shall include two stages, namely, preparatory establishment
and initiation of the business.

For the establishment of a rural credit cooperative union of a county (city, district), a preparatory establishment team shall be
formed, and the initiators of the rural credit cooperative union shall entrust the preparatory establishment team as the applicant.

Article 39

The application of a rural credit cooperative union of a county (city, district) within the jurisdiction of a banking regulatory branch
office for preparatory establishment shall be subject to the acceptance and preliminary examination of the banking regulatory branch
office, and shall be subject to the examination of the banking regulatory office for decision. The banking regulatory office shall,
within 4 months as of receipt of the entire application materials, make a written decision on approval or disapproval.

The application for preparatory establishment of a rural credit cooperative union of a county (city, district) within the jurisdiction
of the city where the banking regulatory office is located, shall be subject to the acceptance and examination of the banking regulatory
office for decision. The banking regulatory office shall, within 4 months as of the acceptance, make a written decision on approval
or disapproval.

Article 40

The term of preparatory establishment of a rural credit cooperative union of a county (city, district) shall be 6 months as of the
day when the decision on approval is made. In the case of any particular circumstance, the applicant shall, within 1 month prior
to expiry of the time limit for preparatory establishment, submit to the banking regulatory office the application for postponing
the preparatory establishment. The banking regulatory office shall, within 20 days as of receipt of the written application, make
a decision on whether to approve the postponement or not, and the maximum period postponed for preparatory establishment shall be
3 months.

The applicant shall, prior to the expiry of the time limit prescribed in the preceding paragraph, submit an application for the initiation
of business. If it fails to submit the application within the time limit, the deciding organ shall nullify th

Disclaimer: There is no confidential attorney-client relationship formed by using Laws.com website and information provided on this site is not legal advice. For legal advice, please contact your attorney. Attorneys listed on this website are not referred or endorsed by this website. By using Laws.com you agree to Laws.com Terms Of Use.

Facebook