The branches and foreign exchange administrative departments of the State Administration of Foreign Exchange(SAFE) in all provinces, autonomous regions, and municipalities directly under the central government, and SAFE branches of Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo:
In accordance with the Regulations of the Peoples Republic of China on the Administration of Foreign-funded Banks, which were promulgated by the State Council on November 11, 2006, a circular on foreign exchange management issues involved in the transformation of the branches of foreign-funded banks is hereby given as follows:
1. Business qualifications
Wholly foreign-funded banks after the transformation shall take over the licenses for spot purchases and sales of foreign exchange, forward purchases and sales of foreign exchange, swaps of renminbi against foreign currencies, and other renminbi derivatives against foreign currencies that the original branches of the foreign banks had already obtained, and shall attend to the procedures to alter the registration at the local SAFE branches (including the foreign exchange administrative departments, hereinafter referred to as SAFE branches). The branches of the wholly foreign-funded banks shall take over the licenses for foreign exchange purchases and sales and renminbi derivatives against foreign currencies that the same outlets had obtained before the transformation, and shall attend to the procedures to alter the registration at the local SAFE branches.
The wholly foreign-funded banks after the transformation shall take over the membership in the foreign exchange market of the original branches of the foreign-funded banks. The wholly foreign-funded banks, taking over the membership in the inter-bank spot foreign exchange market, shall go through the procedures to alter the registration at the China Foreign Exchange Trade System; the wholly foreign-funded banks taking over the licenses for inter-bank forward foreign exchange transactions and inter-bank renminbi swaps against foreign currencies shall report the changes to the China Foreign Exchange Trade System for preliminary inspection and to the SAFE to alter the registration; the wholly foreign-funded banks taking over the licenses for market-makers of renminbi-foreign currency transactions in the inter-bank foreign exchange market shall report the changes to the SAFE for registration and filing.
The branches of foreign-funded banks that had obtained the license for QFII custodian shall, after the transformation, apply to the SAFE to confirm their taking over of the license for QFII custodian. If the wholly foreign-funded banks take over the license, a procedure to alter the registration shall be undertaken at the SAFE. If the branches of foreign-funded banks that keep the foreign exchange wholesale business (hereinafter referred to as bookkeeping branches) take over the license, a registration procedure shall be undertaken at the SAFE.
The wholly foreign-funded banks transformed from the branches of foreign-funded banks with a QDII license may take over their QDII quotas directly.
2. Management of the general position over foreign exchange purchases and sales
The SAFE and its branches shall implement the ongoing method to manage the general position over foreign exchange purchases and sales of wholly foreign-funded banks. The wholly foreign-funded banks may take over the general position quotas over foreign exchange purchases and sales of the original branches of the foreign-funded banks. If the wholly foreign-funded banks need to adjust the general position quotas over foreign exchange purchases and sales, they shall, based on their amount of capital, apply to the local SAFE branches in accordance with the Circular of the SAFE on Adjusting the Method of Managing Bank Foreign Exchange Purchase and Sale Positions (HuiFa No.69 [2005]) and the Circular of the General Affairs Department of the SAFE on Prescribing the Banks General Position Quotas over Foreign Exchange Purchases and Sales (HuiZongFa No. 118 [2005]), and other relevant provisions.
The bookkeeping branches not implementing centralized management of the general position over foreign exchange purchases and sales before the transformation may take over the general position quotas over the foreign exchange purchases and sales of the original branches of the foreign-funded banks. The bookkeeping branches implementing centralized management of the general position over foreign exchange purchases and sales before the transformation shall carry the relevant documentation to the local SAFE branches to apply for a re-prescription of their general position quotas over foreign exchange purchases and sales.
3. Transfers of foreign exchange capital and exchanges between local and foreign currencies
Transfers of foreign exchange operating funds between wholly foreign-funded banks and their branches after the transformation can be made at their own discretion. Exchanges between domestic and foreign currencies of foreign-funded bankscapital (or operating funds) are subject to advance approval by the local SAFE branches in accordance with the Circular of the SAFE on the Approval Principles and Procedures for the Banks' Own Foreign Exchange Purchases and Sales under the Capital and Financial Account (HuiFa No.61 [2004]). When the accumulated amount of one-year exchanges between domestic and foreign currencies is more than the equivalent of USD 500 million (including USD 500 million), the local SAFE branches shall give preliminary approval and report to the SAFE for further approval.
4. Accounting items for foreign exchange purchases and sales
Wholly foreign-funded banks after the transformation shall, in accordance with the Interim Measures for the Management of the Designated Foreign Exchange Banks' Handling of Foreign Exchange Purchase and Sale Operations (Decree of the People's Bank of China No.4 [2002]), establish independent foreign exchange purchase and sale accounting items, separate foreign exchange purchases and sales for the clients, their own foreign exchange purchases and sales, intra-system foreign exchange purchase and sale positions management transactions, and market foreign exchange purchase and sale positions management transactions, and they shall be accounted for separately under the accounting items for foreign exchange purchases and sales. The wholly foreign-funded banks that cannot meet the aforesaid requirements by the end of the preparatory period for the transformation shall meet the said requirements within two years after obtaining approval to start operations from the China Banking Regulatory Commission.
5. Management of surplus quotas for short-term external debts and external guarantees
The wholly foreign-funded banks after the transformation shall take over the quotas of the short-term external debt and external financial guarantees provided to overseas enterprises from the original branches of the foreign banks, and shall report to the SAFE and the local SAFE branches. The registrations of claims, debts, and external guarantees that were originally handled by the branches of the foreign banks shall accordingly now be handled by the wholly foreign-funded banks. The changes in the external debts registration shall be handled collectively at one time by the banks at the SAFE. The registration changes of the external guarantees and domestic foreign exchange loans shall be handled collectively at one time by the guarantors or claimants at the local SAFE branches/ sub-branches.
If an overseas bank has both a wholly foreign-funded bank and a bookkeeping branch in China, the said wholly foreign-funded bank and the bookkeeping branch shall share the surplus quotas of the short-term external debt and the external financial guarantees provided to the overseas enterprise. The wholly foreign-funded bank shall be responsible for management.
To go through the aforesaid registration changes or filing, a written application, the approval to start a business issued by the China Banking Regulatory Commission, the licenses for relevant operations issued by the foreign exchange bureaus, and other documents required by the foreign exchange bureaus shall be presented. All SAFE branches shall simplify the procedures for approving a change of registration.
On receiving this Circular, all SAFE branches shall transmit it promptly to the sub-branches and foreign-funded banks under their jurisdiction. In cases of any problems encountered during implementation, please send the feedback to the SAFE in a timely manner.
Telephone numbers:
Balance of Payments Department: 010-68402464, 68402311;
Fax numbers: 010-68402315, 68402303
Capital Account Management Department: 010-68402247, 68402348;
Fax numbers: 010-68402208, 68402349