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CIRCULAR OF THE STATE COUNCIL CONCERNING THE PRROVAL AND TRANSMISSION OF THE OPINIONS OF THE PEOPLE'S BANK OF CHINA ON STRENGTHENING SUPERVISION AND ADMINISTRATION OF FINANCIAL INSTITUTIONS

Category  BANKING Organ of Promulgation  The State Council Status of Effect  In Force
Date of Promulgation  1994-09-29 Effective Date  1994-09-29  

Circular of the State Council Concerning the Prroval and Transmission of the Opinions of the People's Bank of China on Strengthening Supervision and Administration of Financial Institutions



    
Appendix: Opinions on Strengthening Supervision and Administration of

(September 29, 1994)

    

    "The Opinions of the People's Bank of China on Strengthening Supervision
and Administration of Financial Institutions" has been approved by the State
Council, and is hereby transmitted to you for conscientious implementation
thereof."

    Work related to the supervision and administration of financial
institutions is wide-ranging and has a strong policy character. Therefore,
various regions and departments should actively support and fully cooperate
with the People's Bank of China in exercising the function of supervision and
administration. Questions arising during the process of rectifying the
financial institutions shall be appropriately dealt with in accordance with
relevant state provisions in order to promote the safe and efficient
operations of the financial system.
Appendix: Opinions on Strengthening Supervision and Administration of
Financial Institutions

    In order to conscientiously carry out the "Decision of the State Council
on Reform of the Financial System", practically change the functions of the
People's Bank of China, further strengthen the supervision and administration
of financial institutions and maintain stable financial order, the following
opinions on the supervision and administration of financial institutions are
hereby introduced:

    1. The People's Bank of China is authorized by the State Council as the
department in charge of finance and shall in accordance with the law perform
the functions of examining and approving the establishment, alteration and
termination of various types of financial institutions. The establishment of
financial institutions and the operations of financial business must be
approved by the People's Bank of China, and without such approval, the
management of financial business on self-authorization shall, without
exception, be deemed as unlawful management, and shall be dealt with in
accordance with the law. Administration, supervision, investigation for
decision-making activities the People's Bank of China conducts in accordance
with the law with respect to financial institutions shall not be subject to
the interference of any unit or individual.

    In case of management of financial business approved by various regions or
departments on their own decisions without being examined and approved, and
without the certificate for the management of financial business issued by the
People's Bank of China, self-examination and self-correction shall be
conducted in accordance with the law. In case of a necessity of the
establishment, a fresh applicatioin shall be submitted to the People's Bank of
China for approval.    

    2. Branches and sub-branches of the People's Bank of China are agencies of
the Headquarters of the People's Bank of China, and shall approve the
establishment of financial institutions in strict accordance with the
authorization of the Headquarters of the People's Bank of China, and shall
conscientiously ferret out approvals made in violation of regulations and
beyond the authority for the establishment of financial institutions in
accordance with the provisions outlined in the "Circular on Ferreting Out
Approvals for the Establishment of Financial Institution Made Beyond the Scope
of Authority of Branches at Various Levels of the People's Bank of China"
(YIN CHUAN NO.27[1994]). All financial institutions established with approvals
made beyond the scope of authority referred to in the document under reference
YIN CHUAN No.27 [1994], which explicitly requires dissolution or merger, shall
be resolutely dissolved or merged, and settlements of creditor's rights and
debts shall be made finalized jointly with relevant departments. In cases when
no express opinions are outlined in document No.27[1994] on the ferreting out
process, the Headquarters of the People's Bank of China shall, after
clarifying specific circumstances, draft detailed opinions thereon and
disseminate same recently to all branches and sub-branches of the People's
Bank of China for implementation.

    3. Securities institutions operated by financial departments must, at the
earliest possible date, be separated from financial departments. With regard
to such institutions, financial securities institutions of provinces,
autonomous regions, municipalities directly under the Central Government and
cities listed under separate plans which are well-managed in conformity with
the conditions required, shall, in accordance with unified standards, be
transformed into standardized securities corporations following the
examination and approval first by local branches of and thereafter by the
Headquarters of the People's Bank of China, with said corporations subject to
the supervision and administration of the People's Bank of China. Exchange
institutions handling state bond transactions at the prefectural (city) level
shall be combined with and become branches of securities corporations at the
provincial level if in conformity with relevant conditions, and without
exception, shall be dissolved when not in conformity. Financial securities
institutions and service departments handling state bond at and below the
county level may, after ferreting out, become agencies of financial securities
institutions upon receiving the approval by the local branch of the People's
Bank of China. The People's Bank of China jointly with the Ministry of Finance
shall be responsible for ferreting out financial securities institutions.

    4. In accordance with provisions outlined in the "Regulations on the
Administration of Savings", the postal network and stations handling
transactions related to personal savings of the residents must conform with
requirements for establishing savings institutions, and must obtain the
appropriate permits and certificates for managing financial business. Postal
savings network and stations which have failed to obtain appropriate
certificates, but which are nonetheless engaged in private savings
transactions, shall be reported to the local branch of the People's Bank of
China, after the post and telecommunications administrative departments of
provinces, autonomous regions and municipalities directly under the Central
Government prepared itemized reports thereon. Following the approval of the
People's Bank of China and the issuance of relevant permits and certificates,
said institutions may handle savings business of the residents.

    5. Rural cooperative funds are in fact organizations providing mutual
financial assistance serving agriculture and farmers within their respective
communities, and hence are not considered to be financial institutions. The
Ministry of Agriculture bears responsibility for formulating relevant policies
and regulations, as well as to issue directives regarding the administration
and development of cooperative funds in rural areas. The local agricultural
administration departments are departments in charge of cooperative funds in
rural areas. The People's Bank of China shall, in accordance with the law,
exercise supervision of the business activities of cooperative funds in rural
areas, and shall join with agricultural administration departments in
appropriately handling acts in violation of the regulations in respect of
managing deposits and lending transactions.

    6. Serving in its capacity as the department in charge of pawnbroking and
bearing responsibility for the examination and approval of the establishment
of pawnbroking institutions and administration of related business activities,
the People's Bank of China shall, in accordance with relevant state
provisions, ferret out and standardize existing institutions, and order those
to stop the banking business conducted beyond their scope of business within a
prescribed period of time.

    7. In accordance with the "Regulations on the Administration of the
Securities of Enterprises", and with requirements stipulated by the General
Office of the CPC Central Committee and the General Office of the State
Council concerning exercising strict administration of markets for lottery
tickets and prohibiting the issuance of unauthorized lottery tickets, the
People's Bank of China shall join with relevant planning departments at the
same level to strengthen the administration of enterprise securities and
lottery tickets, and shall be responsible for the examination and approval of
the issuance of enterprise securities within the state plan. Unless otherwise
provided for by the State Council, no funds shall be raised from the society
and no lottery tickets shall be issued without the approval of the People's
Bank of China. Those found in violation of the relevant provisions concerning
the issuance of securities and lottery tickets shall be investigated and dealt
with by the People's Bank of China jointly with relevant departments.

    8. With regard to making investments by purchasing shares from financial
institutions, the "Circular on Printing and Distributing `the Provisional
Regulations on Investments Related to Purchasing Shares from Financial
Institutions'" of the People's Bank of China shall be implemented strictly.
Departments of parties and the government, PLA units, organizations as well as
various institutions included in the national budget, and the state financial
institutions administering policy shall not make investments by purchasing
shares in financial institutions without the explicit approval of the
organization authorized by the state. Investments involving the purchase of
shares of financial institutions made by the local financial departments,
industrial and commercial enterprises and financial institutions designated as
legal entities shall conform with the conditions and the investment ratio
stipulated by the People's Bank of China. All financial institutions must pay
taxes, operate in strict accordance with the law and conscientiously implement
relevant provisions of the People's Bank of China.



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