Laws of the People's Republic of China

China Banking Regulatory Commission

Order of China Banking Regulatory Commission

No. 3

The present Measures for Supervision and Administration of the Pilot Securitization of Credit Assets of Financial Institutions, which were adopted at the 38th chairman's meeting of China Banking Regulatory Commission on September 29, 2005, are hereby promulgated and shall go into effect as of December 1, 2005.

Chairman of China Banking Regulatory Commission Liu Mingkang

November 7, 2005

Measures for the Supervision and Administration of the Pilot Securitization of Credit Assets of Financial Institutions

Chapter I General Provisions

Article 1

With a view to regulating the pilot securitization of credit assets, promoting the cautious implementation of securitization of credit assets by financial institutions, effectively managing and controlling the relevant risks in the securitization of credit assets and protecting the legitimate rights and interests of investors and the parties concerned, and in accordance with the Banking Supervision Law of the People's Republic of China, the Law of the People's Republic of China on Commercial Banks, the Trust Law of the People's Republic of China and other relevant laws and regulations as well as the Measures for the Administration of the Pilot Securitization of Credit Assets, the present Measures are formulated.

Article 2

For the purposes of the present Measures, the term "financial institutions" shall refer to the commercial banks, policy banks, trust and investment companies, finance companies, urban credit cooperatives and rural credit cooperatives as established in China, and other financial institutions subject to the supervision and administration of China Banking Regulatory Commission (hereinafter referred to as the CBRC).

Article 3

The present Measures shall be applicable to those structural financing activities which are carried out within the territory of the People's Republic of China and whereby a banking financial institution, as the promoter, entrusts the credit assets to a trustee institution, and the trustee institution issues beneficial securities to investment institutions in the form of asset-backed securities and pays the yields from asset-backed securities by the cash generated from the aforesaid assets.

Article 4

When engaging in the securitization businesses of credit assets as the promoter, trustee, credit enhancement institution, loan service institution, capital custodian in the securitization or the investment institution of asset-backed securities, a financial institution shall perform relevant duties according the relevant laws, administrative regulations, ministerial rules and the relevant legal documents relating to the securitization of credit assets, and shall effectively identify, measure, monitor and control relevant risks.

Article 5

The CBRC shall supervise and administrate the securitization businesses of credit assets of financial institutions according to law.

Without approval of the CBRC, a financial institution may not engage in the securitization businesses of credit assets as the promoter or the trustee of special purpose trusts for the securitization of credit assets.

Chapter II Market Access Management

Article 6

The term "promoter in the securitization of credit assets" shall refer to the financial institutions which transfer the credit assets by establishing special purpose trusts.

Article 7

When a banking financial institution, as the promoter in the securitization of credit assets, transfers the credit assets by establishing special purpose trusts, it shall satisfy the following requirements:

(1)

Having good social reputation and operational performance, and having no major irregularities within the latest three years;

(2)

Having sound corporate governance structure, and risk management and internal control system;

(3)

Having a reasonable target and clear strategic planning for the securitization businesses of credit assets, which comply with its overall management objectives and development strategies;

(4)

Having proper standards and procedures for the selection of trustee institutions for special purpose trusts;

(5)

Having professional personnel, a business processing system, accounting system and management information system as well as a risk management and internal control system which are necessary for carrying out the securitization businesses of credit assets;

(6)

Having no bad record on engaging in the securitization businesses of credit assets within the latest three years; and

(7)

Other prudential requirements as prescribed by the CBRC.

Article 8

The term "trustee for special purpose trusts" shall refer to the institution that promises the trusts and thus takes charge of the management of special purpose trust assets and the issuance of asset-backed securities in the course of the securitization of credit assets. A trustee shall be a trust and investment company as established according to law or any other institution approved by the CBRC.

Article 9

To be a trustee for special purpose trusts, a trust and investment company shall satisfy the following requirements:

(1)

Having registered anew for more than three years under the relevant provisions of the state;

(2)

Its registered capital shall be not less than RMB 0.5 billion Yuan, and its net assets at the end of each of the latest three years shall be not less than RMB 0.5 billion Yuan;

(3)

The asset status and fluidity of its self-management businesses are good and comply with the relevant supervisory requirements;

(4)

All of its original deposit liabilities have been cleared up, and there is no new deposit liability or any other disguised liability in the name of trusts, etc.;

(5)

It shall have good social reputation and operational performance, all of its due trust projects shall have been smoothly completed according to the stipulations of contracts, and there is neither bad record of misappropriating trust assets, nor major irregularities within the latest three years;

(6)

Having a sound corporate governance structure and operational procedures for trust businesses, as well as the risk management and internal control system;

(7)

Having professional personnel, a business processing system, accounting system, management information system and a risk management and internal control system necessary for performing the duties of trustee institutions for special purpose trusts;

(8)

Having disclosed the annual report pursuant to the provisions; and

(9)

Other prudential requirements as prescribed by the CBRC.

Article 10

To apply for the qualification of a trustee for special purpose trusts, a trust and investment company shall file an application with the CBRC, and submit the following documents and materials (in triplicate):

(1)

An application report;

(2)

The company's business license, certificate of registered capital and certificate of new registration for three years or more;

(3)

The operational rules, the accounting system as well as the risk management and internal control system for the management of special purpose trust assets;

(4)

The list and resumes of the persons in-charge of businesses and main business personnel for the management of special purpose trust assets;

(5)

The company's financial statements as audited of the latest three fiscal years;

(6)

The self-discipline commitment of the applicant; and

(7)

Other documents and materials as required by the CBRC.

Article 11

The CBRC shall, within five working days as of the date of receipt of complete application materials from a trust and investment company, decide whether or not to accept the application. If the CBRC decides not to accept the application, it shall inform in writing the applicant of the decision and give the reasons therefor; if the CBRC decides to accept the application, it shall, within one month as of the day when the application is accepted, make a written decision on whether or not to approve the application.

Article 12

The market access requirements and procedures for other financial institutions to apply for the qualification of a trustee for special purpose trusts shall be separately promulgated by the CBRC.

Article 13

Where a banking financial institution, as the promoter, entrusts the credit assets to a trustee and lets the trustee issue beneficial securities to investment institutions in the form of asset-backed securities, an application shall be jointly filed by the banking financial institution that satisfies the requirements as prescribed in Article 7 of the present Measures and the financial institution that has obtained the qualification of a trustee for special purpose trusts, and the following documents and materials (in triplicate) shall be submitted thereby:

(1)

An application report signed by the promoter and the trustee;

(2)

A feasibility research report;

(3)

Proposal on the securitization businesses of credit assets;

(4)

Drafts of the trust contract, loan service contract, capital custody contract as well as other relevant legal documents;

(5)

The draft of legal opinions issued by practicing lawyers, the draft of accounting opinions issued by certified public accountants, the draft of the credit rating report and the statements on continuous follow-up rating arrangements as issued by the credit appraisal institutions;

(6)

Promoter's standards and procedures for the selection of the trustee for special purpose trusts;

(7)

The operational procedures, the accounting system as well as the risk management and internal control system of the promoter in the securitization businesses of credit assets;

(8)

The list and resumes of the persons in charge of businesses and main business personnel of the promoter for the securitization businesses of credit assets;

(9)

Trustee's standards and procedures for the selection of the loan service institution, the capital custodian and other institutions involved in the securitization businesses of credit assets;

(10)

The statements on the principles and methods of the trustee for the investment management of the yields from credit assets within the intervals of paying the yields from credit assets; and

(11)

Other documents and materials required to be submitted by the CBRC.

The "proposal on the securitization businesses of credit assets" as mentioned in Item (3) of the preceding Paragraph shall contain:

(1)

Names and domiciles of the promoter, trustee, loan service institution, capital custodian and other institutions participating in the securitization, and statement on their related relationships;

(2)

Statements on the experiences and default records of the promoter, trustee, loan service institution and capital custodian in their respective earlier securitization businesses;

(3)

Standards for choosing credit assets for the establishment of special purpose trusts, statements on the asset pool and the relevant statistical information;

(4)

Granting procedures, examination and approval standards, forms of guaranty and administrative measures for the credit assets in asset pool, and procedures and methods for the disposal of default loans;

(5)

Transaction structure and main rights and obligations of each participant;

(6)

List of taxes and expenses that need to be paid for the cash flow of trust assets, the sources of payments for various taxes and expenses, payment links and the priority order of payments;

(7)

Plan on issuance of asset-backed securities, including the information about the different grades of asset-backed securities, the amount of the principal, credit rating, coupon rate and time limit of each grade and the priority order of the principal and interest payment;

(8)

Modes of internal and external credit enhancement for the securitization businesses of credit assets, and the drafts of the relevant contracts;

(9)

Clause of clearance repurchase and other selective or compulsory clauses with respect to redemption or termination;

(10)

Risk analysis of the securitization business of the aforesaid credit assets as well as the control measures;

(11)

Contents which remind the investment institutions of risks at the eye-catching place of the prospectus; and

(12)

Other contents as prescribed by the CBRC.

Article 14

The CBRC shall, within five working days as of the date of receipt of complete application materials jointly submitted by a promoter and a trustee, decide whether or not to accept the application. If the CBRC decides not to accept the application, it shall inform in writing the applicant of the decision and give the reasons therefor; if the CBRC decides to accept the application, it shall, within three month as of the day when the application is accepted, make a written decision on whether or not to approve the application.

Chapter III Operational Rules and Risk Management

Article 15

A financial institution shall, according to its own operational objectives, capital strength, risk management capacity and features of risks in securitization businesses of credit assets, determine whether or not to engage in the securitization businesses of credit assets, as well as the methods of engagement and the scale.

Article 16

A financial institution shall, before carrying out the securitization businesses of credit assets, fully identify and assess potential credit risks, interest rate risks, fluidity risks, operational risks, legal risks, reputation risks and etc., and shall set up corresponding internal examination and approval procedures, business process system, risk management and internal control system; and the procedures for disposing of the securitization businesses of credit assets and managing the risks therein shall be subject to the examination and approval of its credit management department, funds transaction department, risk management department, legal affair department or regulation compliance department, financial department, settlement department, and other relevant department, and where necessary, may be subject to the approval of the board of directors or a special committee as authorized thereby.

Article 17

A financial institution shall be fully aware of the obligations and duties that shall be borne for its engaging in the securitization businesses of credit assets, and shall, according to its specific role in the securitization businesses of credit assets and the features of risks in securitization businesses of credit assets, set down corresponding risk management policies and procedures, so as to continuously and effectively identify, measure, monitor and control risks in the securitization businesses of credit assets and to avoid possible conflicts of interest resulted from two or more roles it performed in the securitization businesses of credit assets.

A financial institution shall bring the risk management of securitization businesses of credit assets into its overall risk management system.

Article 18

The board of directors and the senior management of a financial institution shall know the securitization businesses of credit assets and the potential risks thereof, and determine the overall strategies and policies for the development of securitization businesses of credit assets, and ensure the human and material resources, such as professional personnel, management information system and accounting system, which are necessary for the securitization businesses of credit assets. The personnel engaged in the securitization businesses of credit assets or the risk management shall fully understand the legal relationship, transaction structure of the securitization businesses of credit assets as well as the main risks and the methods and techniques to control them.

Section I Promoters

Article 19

The credit assets to be securitized by a promoter of the securitization of credit assets shall meet the following requirements:

(1)

Having a comparatively high homogeneity;

(2)

Being able to produce predictable cash flow yields; and

(3)

Complying with the laws, administrative regulations and the relevant provisions as prescribed by the CBRC and other regulatory authorities.

Article 20

A promoter shall transfer credit assets on the basis of the conditions and clauses concerning fair market transaction, and may not act against laws, administrative regulations, the relevant provisions as prescribed by the CBRC and other regulatory authorities, and stipulations in the loan contract.

Article 21

A promoter shall accurately distinguish and appraise the risks transferred by way of securitization businesses of credit assets and the remaining risks, and shall effectively monitor and control the remaining risks.

A promoter shall, according to the relevant provisions in Chapter IV of the present Measures, calculate and withdraw the capital for the remaining risks.

Article 22

A promoter shall ensure that the trustee will remind the investment institutions at an eye-catching place of the prospectus on issuance of asset-backed securities that the asset-backed securities do not represent the promoter's liabilities, and the recourse of investment institutions of asset-backed securities is only limited to the trust assets. The promoter will not assume obligations and duties for other potential losses in the securitization businesses of credit assets except for those as promised in the relevant legal documents on the securitization of credit assets, such as the trust contract or the loan service contract.

Section II Trustees of Special Purpose Trusts

Article 23

A trustee of special purpose trusts shall, within ten working days as of the date of issuance of asset-backed securities, report to the CBRC the information on issuance of asset-backed securities and submit to the CBRC the relevant legal documents formally concluded with the promoter, credit enhancement institution, loan service institution and other institution that provides service for the securitization transaction of credit assets.

During the existence period of asset-backed securities, the trustee shall submit the reports on disclosure thereof to the CBRC.

Article 24

A trustee shall account for and manage the credit assets as the trust assets, its self-owned assets and other assets separately. The trust assets in different securitization transactions shall be separately accounted and managed.

Article 25

Any of the following matters shall be reported to the CBRC by a trustee within five working days as of the date of occurrence:

(1)

The quality of credit assets as the trust assets has significantly changed, which may make it impossible to pay the yields derived from asset-backed securities to investment institutions on schedule;

(2)

The trustee, loan service institution or capital custodian violates the relevant laws, administrative regulations, ministerial rules or other legal documents on the securitization of credit assets, which may affect the payment of yields derived from asset-backed securities on schedule;

(3)

The external credit enhancement institution is changed;

(4)

The credit rating of asset-backed securities or other risk exposure from securitization is changed;

(5)

The clearance repurchase occurs; or

(6)

Other matter as prescribed by the CBRC that may result in major losses to the securitization businesses of credit assets.

Article 26

Where a trustee terminates the performance of duties due to its leave, dismissal by the assembly of holders of asset-backed securities or other circumstance as stipulated in the trust contract, the termination shall be reported to the CBRC within five working days.

A new trustee institution shall report the termination to the CBRC within five working days as of the day when the trust contract is concluded, and submit the newly concluded trust contract as well as other relevant legal documents.

Article 27

Where a loan service institution is changed, the trustee shall timely notify the borrowers of the change, report it to the CBRC within five working days and submit the newly concluded loan service contract.

Where a capital custodian is changed, the trustee shall report the change to the CBRC within five working days, and submit the newly concluded capital custody contract.

Article 28

A trustee shall remind the investment institutions at an eye-catching place of the prospectus on issuance of asset-backed securities that the asset-backed securities only represent the corresponding shares of beneficial rights to special purpose trusts but not the trustee's liabilities . The trustee shall bear the obligations of paying the yields derived from asset-backed securities to investment institutions within the limit of the trust assets, and will not assume obligations and duties for other potential losses in the securitization businesses of credit assets.

Section III Credit Enhancement Institutions

Article 29

For the purposes of the present Measures, the term "credit enhancement" shall refer to the credit protection provided through contractual arrangements in the transaction structure of the securitization businesses of credit assets. A credit enhancement institution shall, in light of its commitment to the obligations and duties in the relevant legal documents, provide a certain degree of credit protection for other institutions that participate in the securitization businesses of credit assets, and assume corresponding risks in the securitization businesses of credit assets.

Article 30

The credit enhancement may be provided by way of internal credit enhancement and/or external credit enhancement. The former shall include but not limited to the over-collateralization, hierarchy of asset-backed securities, cash collateral account and spread account, etc.; and the latter shall include but not limited to the standby letters of credit, guarantee and insurance, etc..

Article 31

A financial institution shall specify the conditions, degree and time limit of protection for the credit enhancement in the relevant legal documents on the securitization of credit assets when providing credit enhancement, and clearly distinguish the obligations and duties borne for credit enhancement from those for other roles it performs.

Article 32

A financial institution shall, within the scope of the laws, administrative regulations and the relevant provisions as prescribed by the CBRC and other regulatory authorities, stipulate the conditions and clauses for the provision of credit enhancement as well as the obligations and duties to be borne according to the conditions and clauses concerning fair market transaction.

Article 33

A credit enhancement institution shall ensure that the trustee disclose the credit enhancement arrangements for the securitization businesses of credit assets and remind the investment institutions at an eye-catching place of the prospectus on issuance of asset-backed securities that the credit enhancement is provided only within the scope as promised in the relevant legal documents on the securitization of credit assets, and the credit enhancement institution will not assume obligations and duties for other potential losses resulted from the securitization businesses of credit assets.

Article 34

A commercial bank shall calculate and withdraw the capital according to the relevant provisions in Chapter IV of the present Measures when providing credit enhancement for the securitization businesses of credit assets.

Section IV Loan Service Institutions

Article 35

The term "loan service institutions" shall refer to the institutions that accept the entrustments of trustees and are responsible for the management of loans in the securitization businesses of credit assets. A loan service institution shall be a financial institution legally established in China which has the qualification for the management of loan-related businesses.

Article 36

A loan service institution can be a promoter in the securitization of credit assets. When a loan service institution is a promoter, it shall conclude a loan service contract separately with the trustee.

Article 37

A loan service institution shall, according to the loan service contract concluded with the trustee institution, collect the principal, interest and other yields derived from the securitized assets, and shall timely and sufficiently transfer them into the capital account opened by the trustee institution at the capital custodian.

Article 38

A loan service institution shall set down policies and procedures for the management of securitized assets, and the duty of managing loans shall be performed by a special operational department of the institution. A separate account shall be established for the securitized assets so as to manage the securitized assets separately from its self-owned credit assets. The securitized assets in different securitization transactions of credit assets shall be separately accounted for and managed as well.

Article 39

A loan service institution shall have necessary professional personnel and corresponding operational processing system and management information system when performing the duty of loan service.

Article 40

The loan service fees shall be determined on the basis of the conditions and clauses concerning fair market transaction.

Article 41

A loan service institution shall ensure that the trustee will remind the investment institutions at an eye-catching place of the prospectus on issuance of asset-backed securities of the fact that the loan service institution performs the duty of managing loans according to the loan service contract does not mean that the loan service institution shall assume the obligations and duties for potential losses resulted from the securitization businesses of credit assets.

Article 42

The CBRC will, according to the economic substance of the obligations and duties borne by a loan service institution in the securitization businesses of credit assets, judge whether or not the risk exposure from securitization is formed. In case the risk exposure from securitization is formed, the loan service institution shall calculate and withdraw the capital in accordance with the relevant provisions in Chapter IV of the present Measures.

Section V Capital Custodians

Article 43

The term "capital custodian" shall refer to the institution that accepts the entrustments of trustees and is responsible for taking care of the capital in trust accounts in the securitization businesses of credit assets.

The promoter or loan service institution in the securitization of credit assets may not act as the capital custodian for a same transaction.

Article 44

The trustee shall select a commercial bank that satisfies the following requirements as the capital custodian:

(1)

Having a special business department responsible for performing the duty of keeping the trust capital;

(2)

Having a sound capital custodian system and a risk management and internal control system;

(3)

Having the conditions and abilities for the safe keeping of the trust capital;

(4)

Having enough full-time personnel who are familiar with the business operations regarding safekeeping of trust capital;

(5)

Having a safe and efficient settlement and clearing system;

(6)

Having business premises, safety measures and other facilities as required for keeping the trust capital; and

(7)

Having no major irregularities within the latest three years.

Article 45

A capital custodian shall set up separate accounts for each trust capital in the securitization of credit assets and manage them separately, and shall strictly separate the trust capital under its custody from its self-owned assts or any other assets it manages.

Article 46

Where a capital custodian, within the interval for paying yields derived from credit assets to the investment institutions of asset-backed securities, finds that any investment instruction for managing the yields from credit assets violates any law, administrative regulation, any other relevant provision or the contract on keeping the capital, it shall report the violation to the CBRC.

Section VI Investment Institutions of Asset-backed Securities

Article 47

If a financial institution can buy and sell government bonds or financial bonds under the laws, administrative regulations or the relevant provisions as prescribed by the CBRC and other regulatory authorities, it may also invest in asset-backed securities within the scope as prescribed by the laws, administrative regulations as well as by the relevant provisions of the CBRC and other regulatory authorities.

Article 48

A financial institution that invests in asset-backed securities shall be fully aware of the potential credit risks, interest rate risks, fluidity risks, legal risks and etc., and shall formulate corresponding policies and procedures for investment management, and establish a business process system, a management information system as well as a risk control system for making investment in the asset-backed securities.

The personnel participating in the investment in and risk management of asset-backed securities shall fully know the transaction structure, the status of asset pool, the situation of credit enhancement and credit rating as well as other information, and make an investment decision based thereon, and shall analyze risk features of asset-backed securities and apply relevant risk management methods and techniques to control the risks.

Article 49

A financial institution that invests in asset-backed securities a will face potential credit risks of the assets in asset pool. The financial institution shall, according to the clients, regional and industrial characteristics of the assets in asset pool, bring the aforesaid credit risks into its uniform credit risk management system, which includes the management of risk concentration.

Article 50

A financial institution that invests in asset-backed securities shall apply the internal quota management, and shall, according to its risk preference, capital strength, risk management capacity and features of risks in the securitization of credit assets, specify and regularly examine and upgrade the investment quota, risk quota, stop-loss limits, etc. of asset-backed securities, and simultaneously formulate the procedures for monitoring and handling the situations of exceeding the quota.

Article 51

The department responsible for the investment in asset-backed securities of a financial institution shall be relatively independent of the department responsible for risk management. Within the department responsible for the investment in asset-backed securities, the foreground shall be strictly separated from the background.

Article 52

A promoter of the securitization of credit assets may not invest in the asset-backed securities initiated by it, unless it holds the asset-backed securities of the lowest grade.

A trustee of special purpose trusts may not use the funds in the name of owners' equity or the trust assets to invest in the asset-backed securities initiated by it, unless it carries out advance redemption according to the relevant provisions (or contract).

Article 53

In case any other institution participating in the securitization of credit assets invests in the asset-backed assets issued in the same securitization transaction, it shall set up an effective isolation mechanism of internal risk, and let an department independent of other duties in the securitization transaction (such as the duty of loan service or capital preservation) take charge of the investment management of asset-backed securities, and may not make use of its information predominance to conduct any insider trading or market manipulation.

Article 54

To invest in asset-backed securities, a commercial bank shall calculate and withdraw the capital pursuant to the relevant provisions in Chapter IV of the present Measures.

Article 55

The capital under the item of owners' equity of a trust and investment company that can be used and the trust capital under the item of trusts in which the trustor is not a natural person can be used to invest in asset-backed securities. The balance of investment in asset-backed securities by the owners' equity of a trust and investment company may not exceed 50% of its net assets, and the sum of its fixed assets for self use, equity investment and investment in asset-backed securities may not exceed 80% of its net assets.

Chapter IV Capital Requirements

Article 56

A commercial bank engaged in the securitization businesses of credit assets shall calculate the capital adequacy ratio pursuant to the Measures for the Administration of Capital Adequacy Ratios of Commercial Banks as well as the present Measures.

Article 57

In order to sufficiently guard against the risks resulted from the securitization businesses of credit assets, the capital calculated and withdrawn by a commercial bank shall be based the economic substance of the securitization businesses of credit assets, but not only restricted to the legal form thereof.

Article 58

The risk exposure resulted from the securitization businesses of credit assets of a commercial bank is termed as the risk exposure from securitization, which includes but not limited to the asset-backed securities and credit enhancement. If the reserve account is taken as the assets of a promoter, it shall be regarded as the risk exposure from securitization.

For the purposes of the preceding Paragraph, the reserve account shall include but not limited to the cash collateral account and the spread account.

Article 59

In case a commercial bank engages in the securitization businesses of credit assets as the promoter, credit enhancement institution, investment institution or loan service institution, it shall calculate and withdraw the corresponding capital as long as the risk exposure from securitization is resulted.

The CBRC has the right to judge whether a commercial bank has the risk exposure from securitization in light of the economic substance of the securitization businesses of credit assets, and determine how to calculate and withdraw the corresponding capital.

Article 60

Only when all of the following conditions are satisfied, can a promoter deduct the securitized credit assets when calculating the risk-weighted assets:

(1)

The major credit risks relating to the transferred credit assets have been diverted to an independent third-party;

(2)

The promoter has no longer actually or indirectly controlled the transferred credit assets;

To prove that the promoter has no longer actually or indirectly controlled the transferred credit assets, the legal opinions issued by practicing lawyers are indispensable so as to show that the promoter has conducted the bankruptcy remoteness of the transferred credit assets.

The circumstances under which the promoter actually or indirectly controls the transferred credit assets include but not limited to:

a.

The promoter can redeem the transferred credit assets for making profits, except that the promoter is demanded to redeem or replace the transferred credit assets according to Article 14 of the Measures for the Administration of the Securitization of Credit Assets when the transferred credit assets is found to be not in conformity with the scope, category, standards and status as stipulated in the trust contract at day when they are put in stock; and

b.

The promoter is obligated to undertake major credit risks relating to the transferred credit assets.

(3)

The promoter does not undertake the obligation and duty of payment to the investment institutions of asset-backed securities;

(4)

Any of the following clauses may not be included in the trust contract or any other legal document concerning the securitization of credit assets:

a.

The promoter is demanded to change the assets in asset pool so as to enhance the weighted average credit quality in asset pool unless the assets are transferred to an independent third-party institution at the market price;

b.

After the transfer of credit assets, the promoter is allowed to add the first-loss liability or enlarge the support of credit enhancement all the same; and

c.

The yields paid to participating institutions other than the promoter shall be increased in the case of the degradation of the credit quality of asset pool.

(5)

The clearance repurchase shall comply with the requirements set forth in Article 68 of the present Measures.

If the conditions as mentioned in Items (1) to (5) are satisfied, the promoter shall still calculate and withdraw the capital for the remaining risk exposure from securitization.

If any of the conditions as mentioned in Items (1) up to (5) is not satisfied, the promoter shall calculate and withdraw the capital according to the capital requirements prior to the asset securitization.

Article 61

The CBRC shall determine whether the rating of securitization businesses of credit assets appraised by a credit appraisal institution can be taken for the basis for determining the risk weight in light of such criteria as objectivity, independence, international universality, sufficiency of information disclosure, reliability, adequacy of resources, professional capacity of the ranking of asset-backed securities, ranking methods, publicity of results, degree of market acceptance and etc..

Article 62

If the credit rating of securitization businesses of credit assets appraised by a credit appraisal institution is recognized as the basis for determining the risk weight by the CBRC, the risk weight of the risk exposure from securitization shall be determined in light of the corresponding relationship as shown in the Annex to the present Measures.

If the long-term rating is between BB+ (including BB+) and BB-(including BB-), a non-promoter institution shall apply the risk weight of 350% to the risk exposure from securitization it holds, and the promoter shall deduct the risk exposure from securitization from the capital.

If the rating of the risk exposure from securitization of the highest grade has not been conducted, the risk weight shall be determined according to the average risk weight of the transferred credit assets. Any other risk exposure from securitization for which the rating has not been conducted shall be deducted from the capital.

Article 63

In case there are two different rating results for the same risk exposure from securitization, a commercial bank shall apply the corresponding high risk weight.

In case there are three or more different rating results for the same risk exposure from securitization, a commercial bank shall choose the high one from the two corresponding low risk weights.

The adoption of Standard & Poor ranking symbols in the present Measures is only for the purpose of demonstration, and the CBRC will not designate the selection of credit appraisal institutions.

Article 64

In case there is no credit rating for the securitization businesses of credit assets or the credit rating is not recognized by the CBRC as the basis for determining risk weight, a commercial bank shall differentiate between the following circumstances, and calculate and withdraw the capital for the risk exposure from securitization:

(1)

Deducting the first-loss liability from the capital;

(2)

Determining the risk weight for the risk exposure from securitization of the highest grade according to the average risk weight of the transferred credit assets; and

(3)

Applying the risk weight of 100% to any other risk exposure from securitization.

Where a guarantor as prescribed in the Measures for the Administration of Capital Adequacy Ratios of Commercial Banks provides the guaranty with the effect of risk mitigation for the risk exposure from securitization, the risk weight shall be determined on the basis of the one of direct creditor's rights of the guarantor.

Article 65

The credit conversion factor of 100% shall be applied to the off-balance-sheet risk exposure from securitization.

Article 66

If a commercial bank provides guaranty for the securitization businesses of credit assets, the risk weight of the guaranteed object shall be determined in accordance with Article 64 of the present Measures and taken as the risk weight of the aforesaid guarantee no matter whether the credit ranking for the securitization businesses of credit assets is the basis for determining the risk weight,.

Article 67

Under the circumstance that the risk exposure from securitization is deducted from the capital, the special preserve or provision to be calculated and withdrawn shall be first deducted from the risk exposure from securitization, and then 50% of risk exposure from securitization deducted by the special preserve or provision shall be deducted from the core capital and supplementary capital respectively.

Article 68

If the contract on securitization businesses of credit assets contains the clause of, the promoter can not calculate and withdraw the capital for clearance repurchase when the following conditions are satisfied:

(1)

The promoter has the right to determine whether or not to conduct the clearance repurchase, and the exercise of which is not compulsory either formally or substantially;

(2)

The arrangement of clearance repurchase will not exempt the credit enhancement institution or the investment institution of asset-backed securities from the losses it should bear, or will not be used to provide the credit enhancement; and

(3)

Only when the balance of asset pool or the asset-backed securities issued on the basis of the asset pool drops to 10% or less than 10%, can the clearance repurchase be conducted.

If any of the above conditions is not satisfied, the promoter shall calculate and withdraw the capital on the basis of the capital requirements prior to asset securitization.

Article 69

The upper limit of the capital to be calculated and withdrawn by a commercial bank for the securitization businesses of credit assets shall meet the capital requirements prior to the securitization of the transferred credit assets.

Article 70

If a commercial bank provides the hidden support for the securitization businesses of credit assets by exceeding the contractual obligation, the CBRC has the right to order it to calculate and withdraw the capital pursuant to the capital requirements prior to the securitization of the transferred credit assets, and require it to disclose the hidden support provided thereby and the capital as required to be added.

The methods for a commercial bank to provide the hidden support include but not limited to the following:

(1)

The commercial bank redeems part of the assets in asset pool at a price higher than the market price or redeems the assets in asset pool whose credit quality is degrading, except that the promoter is demanded to redeem or replace the transferred credit assets according to Article 14 of the Measures for the Administration of the Securitization of Credit Assets when the transferred credit assets are found to be not in conformity with the scope, category, criterion and status as stipulated in the trust contract at the day when they are put in stock;

(2)

The commercial bank injects new credit assets into the asset pool in the form of discount; and

(3)

The commercial bank increases the first-loss liability that is not stipulated in the contract.

Chapter V Supervision and Administration

Article 71

A financial institution that engages in the securitization businesses of credit assets shall, according to the provisions, submit to the CBRC the financial statements, statistical statements and other reports which are related with the securitization businesses of credit assets. The relevant provisions shall be separately formulated by the CBRC.

Article 72

When any major risk or loss occurs in the securitization businesses of credit assets, a financial institution that engages in the securitization businesses shall timely report it to the CBRC and submit countermeasures.

Article 73

The CBRC shall, according to its specific role in the securitization businesses of credit assets, conduct on-site inspections of the regulation compliance and risk situation of the securitization businesses of credit assets regularly.

Article 74

A financial institution shall disclose the relevant information on the securitization businesses of credit assets it carries out according to the relevant provisions on information disclosure as set down by the CBRC, and the information to be disclosed shall at least include:

(1)

Purposes for carrying out the securitization businesses of credit assets;

(2)

Its roles, services it provides, obligations and liabilities it assumes as well as the upper limits thereof in the securitization businesses of credit assets;

(3)

The summary of securitization businesses of credit assets conducted in the current year;

(4)

The diversion of credit risks of the promoter or the degree of preservation;

(5)

The risk exposure from securitization resulted from the securitization businesses of credit assets and the amount thereof;

(6)

The calculation method and capital requirements for the securitization businesses of credit assets; and

(7)

The accounting methods for the securitization businesses of credit assets involved.

The financial institution shall disclose the aforesaid information within four months after the end of each fiscal year. If it can not do so due to any special reason, it shall apply to the CBRC for extension at least 15 working days in advance.

Article 75

Where a financial institution violates the principle of prudential operation as mentioned in Chapter III of the present Measures when engaging in the securitization businesses of credit assets, or fails to calculate and withdraw the capital pursuant to the relevant provisions in Chapter IV of the present Measures, it shall, according to the CBRC's suggestions on rectification, submit rectification plan to the CBRC and take the rectification measures within a prescribed time limit.

If the financial institution fails to take effective rectification measures within the prescribed time limit or its act causes any major loss, the CBRC has the right to take the following measures:

(1)

Suspending the financial institution's new securitization businesses of credit assets;

(2)

Ordering the financial institution to change directors, senior management or to limit their powers; and

(3)

Other measure as prescribed in Article 37 of the Banking Supervision Law of The People's Republic of China.

Article 76

Where a trustee of special purpose trusts is under any of the following circumstances, the CBRC has the right to disqualify it from being a trustee of special purpose trusts:

(1)

Its business is deteriorating and it suffers a deficit for two consecutive years;

(2)

It commits a major mistake and fails to manage the trust assets with due diligence and thus is dismissed when it acts as the trustee of special purpose trusts;

(3)

It seriously harms the trust assets and the interests of the promoter, the investment institution or any other relevant institution in the securitization of credit assets; or

(4)

Other major matters which will affect its fulfillment of the trustee's duties as regarded by the CBRC.

Chapter VI Legal Liabilities

Article 77

Where a financial institution engages in the securitization businesses of credit assets as the promoter or the trustee of special purpose trusts in the securitization of credit assets without approval of the CBRC, it shall be punished by the CBRC in accordance with Article 44 of the Banking Supervision Law of the People's Republic of China.

Article 78

Where a financial institution that engages in the securitization businesses of credit assets is under any of the following circumstances, it shall be punished by the CBRC in accordance with Article 45 of the Banking Supervision Law of the People's Republic of China:

(1)

Investing in asset-backed securities in violation of the present Measures, or seriously violating other principles of prudential operation as prescribed in Chapter III and Chapter IV of the present Measures;

(2)

Providing false statements, reports or other documents and materials, or providing the statements, reports or other documents and materials in which important facts are concealed;

(3)

Failing to conduct risk revelation or information disclosure according to the provisions; or

(4)

Refusing to enforce measures as prescribed in Article 75 of the present Measures.

Article 79

Where a financial institution engages in the securitization businesses of credit assets but fails to report to the CBRC or submit the relevant documents and materials, it shall be punished by the CBRC in accordance with Article 46 of the Banking Supervision Law of the People's Republic of China.

Article 80

A financial institution that commits any other illegal or irregular act in the securitization businesses of credit assets shall be punished by the CBRC in accordance with the Banking Supervision Law of the People's Republic of China, the Law of the People's Republic of China on Commercial Banks, the Trust Law of the People's Republic of China, the Measures for the Punishment against Financial Malfeasance and other relevant laws and administrative regulations.

Article 81

Where a financial institution violates the relevant laws, administrative regulations or ministerial rules when engaging in the securitization businesses of credit assets, it shall be punished by the CBRC according to Articles 77 through 80 of the present Measures, in addition, the directors, senior managerial personnel and other person directly responsible may be punished in accordance with Article 47 of the Banking Supervision Law of the People's Republic of China and the relevant provisions of the Measures for the Punishment against Financial Malfeasance, and if a crime is constituted, it shall be investigated for criminal liabilities according to law.

Chapter VII Supplementary Provisions

Article 82

A commercial bank shall calculate and withdraw the capital in light of the present Measures if it invests in overseas asset-backed securities.

Article 83

The rural cooperative banks, urban credit cooperatives, rural credit cooperatives and financial companies that engage in the securitization businesses of credit assets shall calculate the capital requirements for the risk exposure from securitization in light of the present Measures. The branch of a foreign bank in China that engage in the securitization businesses of credit assets shall calculate the proportion of the Renminbi shares in the sum of operational funds and reserves to those in the risk capital in light of the present Measures.

Article 84

The relevant provisions on the investment in asset-backed securities made by the financial institutions other than trust and investment companies to which the assessment of capital adequacy ratio are not applicable shall be separately formulated by the CBRC.

Article 85

The decision-making body of a financial institution that has not established a board of directors shall perform the relevant duties of the board of directors as prescribed by the present Measures.

Article 86

For the purposes of the present measures, the following terms shall have the meaning defined herein:

(1)

The term "over-collateralization" refers to an internal credit enhancement method in the securitization businesses of credit assets, in which the difference between the value of asset pool and the nominal value of asset-backed securities is taken as the credit protection and is used to make up for the potential losses in the securitization businesses of credit assets.

(2)

The term "hierarchy of asset-backed securities" refers to an internal credit enhancement method in the securitization businesses of credit assets, in which the asset-backed securities are classified into different grades on the basis of the sequence of payments, and in which the securities of a comparatively high grade have priority to those of a comparatively low grade in the aspect of the payment of the principal and interest, and therefore, they have a comparatively higher credit rating; and the securities of a comparatively low grade will bear losses before those of a comparatively high grade to serve for the credit protection to the securities of a comparatively high grade.

(3)

The term "cash collateral account" refers to an internal credit enhancement method in the securitization businesses of credit assets. The funds in a cash collateral account which are provided by the promoter or from the loans of other financial institutions are used to make up for the potential losses in the securitization businesses of credit assets.

(4)

The term "spread account" refers to an internal credit enhancement method in the securitization businesses of credit assets. The funds in a spread account which come from the excess spread after the interest expenses of asset-backed securities and other expenses for securitization transactions are deducted from the interest incomes of credit assets and other incomes from securitization transactions, are used to make up for the potential losses in the securitization businesses of credit assets.

(5)

The term "first-loss liability" refers to the primary financial support or risk protection that is provided by the credit enhancement institution for other institutions that participate in the securitization businesses of credit assets.

(6)

The term "clearance repurchase" refers to an option to redeem the risk exposure from securitization before paying off the assets in asset pool or the asset-backed securities. As a rule, the clearance repurchase is the conduct of redeeming the remaining risk exposure from securitization after the balance of the asset pool or the asset-backed securities is reduced to a certain level.

Article 87

The power to interpret the present Measures shall remain with the CBRC.

Article 88

The present Measures shall come into force as of December 1, 2005.