Circular of China Banking Regulatory Commission Concerning the Printing and Distribution of the Interim Provisions on Administering
Loan Companies
Yin Jian Fa [2007] No. 6
Each banking regulatory bureau, state-owned commercial bank, joint stock commercial bank, China Postal Savings Bank, Beijing Rural
Commercial Bank, Shanghai Rural Commercial Bank, Tianjin Rural Cooperative Bank,
China Banking Regulatory Commission constituted the Interim Provisions on Administering Loan Companies for the purpose of doing well
in the pilot work of adjusting and relaxing the policies on the access of banking financial institutions to the rural areas. We hereby
print and distribute them to you, please abide hereby.
Each banking regulatory bureau shall forward the present Circular to the branches of banking regulatory bureaus, urban commercial
banks, rural commercial banks and rural cooperative banks within your respective jurisdictions.
China Banking Regulatory Commission
January 22, 2007
Interim Provisions on Administering Loan Companies
Chapter I General Rules
Article 1
In accordance with the Banking Supervision Law of the People’s Republic of China, Law of the People’s Bank of China on Commercial
Banks, Company Law of the People’s Republic of China and other laws and regulations, the present Provisions are constituted with
a view to protecting the legitimate rights and interests of loan companies and their clients, regulating the acts of loan companies,
intensifying the supervision and administration thereof, and ensuring the steady and sound operation of loan companies.
Article 2
The term “loan company” means the non-banking financial institutions set up by domestic commercial banks and rural cooperative banks
in rural areas upon approval of China Banking Regulatory Commission (hereinafter referred to as the CBRC) in accordance with the
related laws and regulations with exclusive purpose to provide credit services for farmers within jurisdiction of counties and for
the development of agriculture and rural economy.
A loan company is a limited liability company solely invested by a domestic commercial bank or rural cooperative company.
Article 3
A loan company is an enterprise with independent legal person status. It enjoys all property rights formed by its investments, enjoys
the civil rights and undertakes civil liabilities with all properties of the company.
The investors of a loan company have the right to enjoy the asset proceeds, make important resolutions and choose managers.
Article 4
A loan company shall abide by the business principles of safety, liquidity and benefits, operate independently, undertake the risks
by itself, assume profits and losses by itself and discipline itself.
Article 5
A loan company shall operate according to law, and its operation may not be interfered by any entity or individual.
Article 6
A loan company shall conform to the laws and administrative regulations of the state, shall fulfill the financial guidelines and
policies of the state, and shall be subject to the supervision and administration of the banking regulatory institutions according
to law
Chapter II Institution Establishment
Article 7
The name of a loan company shall be composed of the administrative division, brand name, industry involved and organization form,
among which the administrative division means the name of the administrative division at the county level.
Article 8
To set up a loan company, the following requirements shall be met:
(1)
Having the articles of association satisfying the related provisions;
(2)
Having registered capital of no less than 500, 000 Yuan, which shall be a lump-sum cash capital paid by the investor once for all;
(3)
Having professional and experienced senior managers;
(4)
Having professional and experienced employees;
(5)
Having the necessary organizational structure and management systems;
(6)
Having a business place, safety guarantee measures and other business-related facilities satisfying the related requirements; and
(7)
Other requirements as provisioned by the CBRC.
Article 9
To set up a loan company, the investor shall satisfy the following requirements:
(1)
Being a domestic commercial bank or rural cooperative bank;
(2)
Having a registered capital of no less than RMB 5 billion Yuan;
(3)
Having a sound corporate governance and a perfect and effective internal control system;
(4)
Its main supervisory indicators satisfy the supervisory requirements; and
(5)
Other prudent requirements as provisioned by the CBRC.
Article 10
The establishment of a loan company shall go through two phases, namely the preparatory establishment and the start of business.
Article 11
An applicant shall submit the following documents and materials for the preparatory establishment of a loan company:
(1)
An application for preparatory establishment;
(2)
A feasibility study report;
(3)
A preparatory establishment plan;
(4)
The name list and resumes of the persons in charge of the preparatory establishment;
(5)
The non-local investor shall submit the balance sheets and the profit and loss statements of the recent 2 years, and the written opinions
of the banking regulatory institution of the place where this investor is registered as well; and
(6)
Other materials as prescribed by the CBRC.
Article 12
The maximum preparatory establishment period for a loan company shall be 6 months as of the approval date. If the applicant meets
the requirements for the start of business within this period, it may apply for start of business.
For applying for the start of business of a loan company, the applicant shall provide the documents and materials as follows:
(1)
An application for starting business;
(2)
A report on work of the preparatory establishment;
(3)
A draft of the articles of association;
(4)
A capital verification report as issued by a statutory capital verification institution;
(5)
The archival materials of the candidate senior managers;
(6)
The evidential materials proving the ownership or use right of the business place;
(7)
The compliance certificates for the safety and fire control facilities of the business place as issued by the public security and
fire control departments; and
(8)
Other materials as requested by the CBRC.
Article 13
The application for the preparatory establishment of a loan company shall be accepted by the banking regulatory branch bureau or
by the banking regulatory bureau at the locality of the loan company, and shall be examined and decided by the banking regulatory
bureau. The banking regulatory bureau shall make a written decision on approval or disapproval within 4 months as of its receipt
of a compete set of the application materials or after it accepts the application.
The application for the start of business of a loan company shall be accepted, examined and decided by the banking regulatory branch
bureau or by the banking regulatory bureau at the locality of the loan company. The banking regulatory branch bureau or banking regulatory
bureau of the city where the loan company is located shall make a decision on approval or disapproval within 2 months as of the date
of acceptance.
Article 14
A loan company may, establish county-based branch companies in light of the development of its businesses. The establishment of a
branch company shall go through two phases, namely the preparatory establishment and the start of business.
The preparatory establishment plan of a branch company of a loan company shall be provided to the regulatory office for archival purposes.
In case no regulatory office is established, it shall be submitted to the banking regulatory branch bureau or to the banking regulatory
bureau at the locality of the branch company to be established for archival purposes. The application for start of business of a
branch company shall be accepted, examined and decided by the banking regulatory branch bureau or by the banking regulatory bureau
of the city at the locality of the branch company. The banking regulatory branch bureau or the banking regulatory bureau at the locality
of the branch company to be established shall, within 2 months as of the date of acceptance, make a decision on approval or disapproval.
Article 15
A loan company or its branch company approved to start business shall be granted a financial permit by the decision-making organ
and shall handle the registration formalities upon the strength of the financial permit in the administrative department for industry
and commerce so as to obtain a business license.
Chapter III Organizational Structure and Business Management
Article 16
A loan company is not required to set up the board of directors or board of supervisors, but shall set up a sound business management
mechanism and a supervision mechanism. The investor may appoint supervisors or employ an external institution for supervision.
Article 17
The business management group of a loan company shall be independently decided by the investor and shall be reported to the banking
regulatory branch bureau or the banking regulatory bureau at the locality of the loan company for archival filling.
Article 18
The articles of association of a loan company shall be drafted and modified by the investor and submitted to the banking regulatory
branch bureau or the banking regulatory bureau at the locality of the loan company to be examined and approved.
Article 19
The board of directors of a loan company shall take charge of preparing business operation policies and business development plans.
In case no board of directors is established in a loan company, the business operation policies and business development plans shall
be prepared by the business management group and shall be exercised upon approval of the investor.
Article 20
Upon approval of the banking regulatory branch bureau or the banking regulatory bureau at the locality of the loan company, a loan
company may conduct the following businesses:
(1)
various loans;
(2)
the instruments discount;
(3)
the assets transfer;
(4)
the settlement under loans; and
(5)
other asset businesses as approved by the CBRC. No loan company may draw on deposits of the general public.
Article 21
The operating fund of a loan company shall include paid-in capital and borrowed money from the investor.
Article 22
In case a loan company carries out business operations, it shall aim at serving the farmers, agriculture and development of rural
economy. The loans shall be mainly used to support the development of the farmers, agriculture and rural economy.
Article 23
A loan company shall follow the principle of small amount and dispersion, enlarge the coverage of loans and avoid the excessive centralization
of loans. The balance of loans granted to a same borrower by the loan company may not be more than 10% of the net assets of the loan
company. The credit balance of a single client as a group enterprise may not be more than 15% of the net assets of the loan company.
Article 24
A loan company shall intensify the management of loan risks, set up a scientific authorization and credit system, credit management
procedures and an internal control system, and improve the abilities to identify and control risks so as to improve the loan quality.
Article 25
A loan company shall, according to the related provisions of the state, set up a prudent and normative asset classification system
and an asset supplement and restraint mechanism, correctly classify the quality of assets, make enough provisions for non-performing
assets, ruefully reflect the situation of its business performances, and guarantee that its capital adequacy ratio is not less than
8% at any time and its adequacy ratio of provision for asset losses not less than 100%.
Article 26
A loan company shall set up a sound internal audit system, check and access the implementation of internal control system as well
as modify and perfect the poor links of internal control so as to guarantee compliance business operations.
Article 27
A loan company shall adopt the uniform accounting system for financial enterprises of the state and set up a sound financial and
accounting system in accordance with the related provisions of the state.
Article 28
A loan company shall truthfully record and reflect its business activities and financial status in an all-round manner and prepare
annual accounting statements, which shall be audited by a qualified accounting firm that are employed by the investor. The audit
report shall be reported to the banking regulatory branch bureau or the banking regulatory bureau at the locality of the loan company
for archival filling.
Article 29
A loan company shall report the accounting statements, statistical statements and other materials to the local banking regulatory
branch bureau or to the banking regulatory bureau at the locality of the loan company and shall be responsible for the authenticity,
accuracy and completeness of such statements and materials.
Article 30
A loan company shall set up an information release system and release the information about its annual business operations, important
events, etc in a timely manner.
Chapter IV Supervision
Article 31
The business operations conducted by a loan company shall be under the supervision of the banking regulatory institution and shall
be integrated into the statements of the investor for supervision.
Article 32
A banking regulatory institution shall conduct persistent and dynamic supervision over capital adequacy ratio, bad loan ratio, risk
management, internal control, risk concentration, and affiliated transactions, etc. of loan companies.
Article 33
A banking regulatory institution shall, in accordance with the capital adequacy status and asset quality status of a loan company,
take the following supervisory measures in a timely manner:
(1)
In case the loan company’s capital adequacy ratio is above 8% and its bad loan ratio is below 5%, the banking regulatory institution
may lesson the inspection frequency and encourage its steady and sound development;
(2)
In case the loan company’s capital adequacy ratio is below 8% but above 4% or its bad loan ratio is above 5%, the banking regulatory
institution shall strengthen the non-on-site supervision and on-the-spot inspections and urge it to supplement its capital and improve
the asset quality within a time limit;
(3)
In case the loan company’s capital adequacy ratio decreases below 4% or its bad loan ratio is above 15%, the banking regulatory institution
shall promptly order it to change the senior managers, cease all business operations, restructure within a time limit, etc.; and
(4)
In case the loan company fails to restructure effectively within the time limit and its capital adequacy ratio is below 2%, the banking
regulatory institution shall order the investor to take it over, or cancel it in a timely manner.
Article 34
The local banking regulatory institution shall, according to the related laws and regulations, check and access the capital adequacy
status, asset quality and validity of the internal control of loan companies, urge them to perfect their capital replenishment mechanism,
loan management system and internal control, and strengthen the risk management.
Article 35
A banking regulatory institution has the power to request an investor to intensify the supervision and inspection over the loan company
it invests in, audit its asset quality on a regular basis, assess the loan authorization and credit system, credit management procedures
and internal control system, and has the power to request the investor to supple capital in accordance with the operation status
of the loan company so as to guarantee the steady and sound operation of the loan company.
Article 36
In case a loan company violates the present Provisions, the banking regulatory institution has the power to give it a warning of
risks, make an interview, conduct supervisory inquiries, order it to cease its business operations, or take other measures so as
to urge it to promptly make a rectification and avoid the asset risks.
Article 37
In case a loan company or any of its employees goes against any law or regulation of the state during the process of business operation
and management, it or he shall be punished according to the Banking Supervision Law of the People’s Republic of China, Law of the
People’s Republic of China on Commercial Banks and other related laws and administrative regulations. Where any crime is constituted,
criminal liabilities shall be investigated.
Article 38
In case a loan company or any of its employees is dissatisfied with the punishment decision as provided for by the banking regulatory
institution, it or he may file an application for an administrative review or file an administrative lawsuit with the people’s court.
Chapter V Change and Termination of Institutions
Article 39
In case a loan company plans to change any of the following items, it shall be subject to the approval of the banking regulatory
branch bureau or the banking regulatory bureau at the locality of the loan company:
(1)
to change its name;
(2)
to change its registered capital;
(3)
to change its dwelling place;
(4)
to amend its articles of association; or
(5)
any other modification items as provisioned by the CBRC.
Article 40
A loan company shall apply for dissolution in the case of any of the following circumstances:
(1)
The business term as described in the articles of association expires, or any other dissolution cause as indicated in the articles
of association arises;
(2)
The shareholders make a resolution of dissolution; or
(3)
It is necessary for it to dissolve owing to merger or split-up.
Article 41
With regard to the dissolution of a loan company, its investor shall conduct in accordance with the Law of the People’s Republic
of China on Commercial Banks, Company Law of the People’s Republic of China and related administrative regulations.
Article 42
In case a loan company is to be terminated as a result of dissolution or being cancelled, it shall hand back the financial permit
to the issuing organ, go through the deregistration formalities in the administrative department for industry and commerce in a timely
manner, and shall make an announcement.
Chapter VI Supplementary Rules
Article 43
The term “rural areas” as mentioned in the present Provisions mean the counties (cities) and areas at and below the county (city)
level in the central-and-western regions, northeast regions and Hainan Province, as well as the poverty counties of other provinces
(autonomous regions and municipalities) as ascertained by the state and the poverty counties as ascertained by the provinces and
the areas below the county level.
Article 44
In case a foreign-funded financial institution intends to set up a loan company in a rural areas, it shall comply with the present
Provisions.
Article 45
In the case of other matters not included in the present Provisions, they shall be governed by the Banking Regulatory Law of the
People’s Republic of China, Law of the People’s Republic of China on Commercial Banks, Company Law of the People’s Republic of China
as well as other laws, rules and regulations.
Article 46
The CBRC shall be responsible for interpreting the present Provisions.
Article 47
The present Provisions shall go into effect as of the promulgation date.
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