App | 中文 |
HOME >> POLICIES >> LATEST RELEASES

Decree of the People’s Bank of China [No 2, 2014]

Updated: Jul 7,2014 11:26 AM     pbc.gov.cn

The People’s Bank of China (PBOC) has formulated the Administrative Rules on Purchase and Sale of Foreign Exchange by Bank in accordance with the Law of the People’s Republic of China on People’s Bank of China and the Regulations on Foreign Exchange Administration. Adopted at the 4th Governor’s Meeting on March 26, 2014, the Administrative Rules on Purchase and Sale of Foreign Exchange by Banks is now being released and shall enter into effect on August 1, 2014.

Governor Zhou Xiaochuan

June 22, 2014

Administrative Rules on Purchase and Sale of Foreign Exchange by Banks

Chapter I General Provisions

Article 1 In order to regulate a bank’s purchase and sale of foreign exchange by banks and safeguard the stable functioning of the foreign exchange market, these Rules are formulated in accordance with the Law of the People’s Republic of China on People’s Bank of China and the Regulations on Foreign Exchange Administration.

Article 2 The People’s Bank of China (PBOC) and its branch offices, the State Administration of Foreign Exchange (SAFE) and its branch offices are the regulatory authorities for the purchase and sale of foreign exchange by banks.

Article 3 Terms in these Rules are defined as the following:

Banks refer to commercial banks, urban credit cooperatives, rural credit cooperatives, other deposit money banks, and policy banks;

Purchase and sale of foreign exchange by banks refer to bank handling of the conversion between RMB and foreign exchange for their customers or on a proprietary basis, including spot foreign exchange purchase and sale, and RMB/foreign exchange derivative business;

Spot foreign exchange purchase and sale refers to foreign exchange purchase and sale transactions cleared within 2 business days after the deal is reached, the clearing price being the foreign exchange sale and purchase price prevailing on the day when the deal is reached;

RMB/foreign exchange derivative business refers to forward foreign exchange sale and purchase, RMB and foreign exchange futures, RMB and foreign exchange swaps, RMB and foreign exchange options, or a portfolio including the above-mentioned products;

Comprehensive foreign exchange purchase and sale position refers to a bank’s foreign exchange position from its foreign exchange purchase and sale transactions conducted for its customers and on a proprietary basis, and its RMB and foreign exchange transactions on the inter-bank foreign exchange market.

Article 4 A bank shall obtain the approval from the SAFE for its foreign exchange purchase and sale business.

Article 5 A bank shall conduct foreign exchange purchase and sale based on these Rules and other regulations on the foreign exchange purchase and sale business.

Chapter II Market Access and Exit

Article 6 A bank may apply for the foreign exchange purchase qualification when satisfying the following conditions:

1) It has a financial business license;

2) It has established foreign exchange purchase and sale business procedures and control mechanism;

3) It has the necessary software and hardware for the business;

4) It has senior management and professional staff with the needed working experience.

Article 7 A bank shall meet the following conditions in its application to conduct RMB/foreign exchange derivative business:

1) It has the qualification to conduct spot foreign exchange purchase and sale business;

2) It has put in place a complete set of business management procedures for derivative business;

3) It has senior management and professional staff with the needed working experience;

4) It has complied with the relevant provisions prescribed by the banking sector regulator for the trading of financial derivatives.

Article 8 A bank may apply for the spot foreign exchange purchase and sale qualification and the RMB/foreign exchange derivative qualification in one application.

Article 9 A bank’s headquarter shall apply for the spot foreign exchange purchase and sale qualification or RMB/foreign exchange derivative qualification for the entire bank, except in the case when the application is filed by a branch of a foreign-funded bank.

A policy bank or a commercial bank with nationwide outlets shall apply to the SAFE for qualifications for spot foreign exchange purchase and sale and RMB/foreign exchange derivative business. Other banks shall apply to the local branch offices of the SAFE.

Article 10 In order to conduct spot foreign exchange purchase and sale business or RMB/foreign exchange derivative business, a bank’s branch office shall receive authorization from the office at its next higher level that has acquired the qualification for the business, and file the authorization with the local branch office of the SAFE for record-keeping purpose.

Article 11 When a merger or spin-off takes place while a bank conducts foreign exchange purchase and sale business on a continual basis, the newly established bank shall apply to the SAFE for foreign exchange purchase and sale qualification; when the name or the domicile of business operation of a bank has been changed or in the case of merger or spin-off of the branch offices that conduct foreign exchange purchase and sale business, the change shall be reported to the SAFE for record-keeping purpose within 30 days after the change takes place.

Article 12 When a bank terminates its spot foreign exchange purchase and sale business or RMB/foreign exchange derivative business, it shall report the termination to the SAFE within 30 days after the termination.

Article 13 When a bank is closed or goes through a bankruptcy procedure in accordance with relevant laws and regulations, it shall automatically lose its qualification of foreign exchange purchase and sale business.

Chapter III Regulation and Supervision

Article 14 A bank shall establish and continuously improve the risk management and control mechanism for its foreign exchange purchase and sale business and establish a mechanism to regularly assess the conduct of the foreign exchange purchase and sale business and its risk management.

The SAFE shall regularly evaluate a bank’s compliance of foreign exchange administrative regulations in its foreign exchange purchase and sale business.

Article 15 A bank shall appoint a business department as the lead management department for purchase and sale of foreign exchange to be in charge of monitoring and coordinating the implementation of foreign exchange regulations in the bank and its branch offices.

Article 16 A bank shall provide training to the management personnel, business handling personnel, salespersons, traders, and other related personnel on foreign

exchange administrative policies to ensure that they have the necessary knowledge of policies and regulations.

Article 17 A bank shall set accounting entries for purchase and sale of foreign exchange, distinguish between the purchase and sale of spot foreign exchange and RMB/foreign exchange derivatives, and separately conduct accounting of purchase and sale of foreign exchange for their customers, the banks’ propriety purchase and sale of foreign exchange, and its transactions in the interbank foreign exchange market.

Article 18 When carrying out the business of purchase and sale of foreign exchange, a bank shall, based on the principle of “know your business, know your clients, and conduct due diligence”, and review the relevant certificates and commercial documents. A bank shall observe the regulations that the SAFE has clearly prescribed.

Article 19 In its RMB/foreign exchange derivatives business, a bank shall conduct a derivative transaction with a client that has authentic demand. The derivatives shall be compatible with the clients’ risk acceptance capacity, while the bank shall observe the provisions of the SAFE on clients, products, trading positions, and etc.

Article 20 A bank shall observe regulations on the position of purchase and sale of foreign exchange, and make sure the comprehensive position of purchase and sale of foreign exchange remains within the stipulated limit in the prescribed timeframe.

The limit of a bank’s comprehensive position of purchase and sale of foreign exchange shall, based on the principle of legal-entity supervision, be determined on a comprehensive basis, considering the BOP situation, the performance of bank’s purchase and sale of foreign exchange, macro-prudential management, and etc. Branches of foreign-funded banks are deemed as legal-entity and regulated accordingly.

Article 21 After obtaining the qualification for foreign exchange purchase and sale business, a foreign-funded bank that has not obtained the qualification for RMB business may apply to the local branch office of the PBOC to open a special RMB account for the purchase and sale of foreign exchange, for receiving and transferring RMB funds in the conduct of foreign exchange purchase and sale business. Such a bank will be not subject to Article 20 of these Rules, i.e. on comprehensive position of purchase and sale of foreign exchange.

Article 22 When a bank conduct the business of purchase and sale of foreign exchange, it may decide on what currencies to purchase and sell based on its business

operation, and shall observe relevant provisions of the PBOC and the SAFE on management of banks’ foreign exchange quotations.

Article 23 A bank shall report to the SAFE on the data of purchase and sale of foreign exchange and comprehensive foreign exchange position as well as other statements and information as required by the SAFE on a timely, accurate, and complete basis, check the data and statements regularly and make error correction on a timely basis.

Article 24 A bank shall establish a system to keep the foreign exchange purchase and sale invoices for no less than five years based on the business classification of purchase and sale of foreign exchange.

Article 25 A bank shall collaborate with the SAFE in the supervision and inspection, truthfully explain the situation, provide relevant documents and information, and shall not refuse, or obstruct the supervision and inspection, or conceal information.

Article 26 The SAFE shall strengthen regulation and supervision of the business of purchase and sale of foreign exchange of banks via off-site surveillance, on-site inspection and other means, establish and improve the supervisory files for the foreign exchange purchase and sale business.

Chapter IV Penalties

Article 27 A bank that conducts the business of purchase and sale of foreign exchange without authorization shall be penalized by the SAFE or other relevant departments in line with the Section 1, Article 46 of the Regulations on Foreign Exchange Administration.

Article 28 A bank shall be penalized by the SAFE in accordance with Article 47 of the Regulations on Foreign Exchange Administration for any of the following misconducts:

(1) It has failed to verify and review relevant certificates or commercial documents when conducting the business of purchase and sale of foreign exchange;

(2) It has failed to keep its comprehensive position of foreign exchange within the limit prescribed by the SAFE; or

(3) It has failed to implement the administrative rules on exchange rate quotations stipulated by the PBOC and the SAFE.

Article 29 A bank that has failed to report to the SAFE the relevant data on

purchase and sale of foreign exchange and comprehensive position, as well as other relevant statements and materials shall be penalized by the SAFE in accordance with the Article 48 of the Regulations on Foreign Exchange Administration.

Chapter V Supplementary Provisions

Article 30 A bank that has not obtained the qualification for the business of purchase and sale of foreign exchange shall conduct purchase and sale of foreign exchange through a qualified bank.

Article 31 A non-financial institutions shall conduct the business of purchase and sale of foreign exchange in accordance with the provisions of these Rules, unless otherwise stipulated in other SAFE provisions.

Article 32 The PBOC is responsible for interpretation of these Rules.

Article 33 These Rules shall enter into effect on August 1, 2004 and shall prevail when running counter to other stipulations previously made. The Provisional Procedures for Designated Bank’s Purchase and Sale of Foreign Exchange (PBOC Decree No4 [2004]) and the Notice of the People’s Bank of China on Management of the Business of Purchase and Sale of Foreign Exchange (PBOC Document No. 62 [2004]) shall be repealed simultaneously.

VIDEOS