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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II LENDERS AND BORROWERS CHAPTER III TERM OF LOAN, INTEREST RATE AND PLEDGE RATE CHAPTER IV PROCEDURES FOR LOANS CHAPTER V CONTROL OF CREDIT RISKS CHAPTER VI PRESERVATION AND DISPOSAL OF PLEDGE CHAPTER VII PUNITIVE RULES CHAPTER VIII SUPPLEMENTARY PROVISIONS CHAPTER I GENERAL PROVISIONS Article 1. For the purposes of regulating the stock-pledged loan business, protecting the legitimate rights and interests of lenders and borrowers, preventing financial risks and promoting the stable and sound development of the capital market of China, the present Measures are formulated in accordance with the Law of the People's Republic of China on the People's Bank, Banking Supervision Law of the People's Republic of China, Law of the People's Republic of China on Commercial Banks, Securities Law of the People's Republic of China and the Guaranty Law of the People's Republic of China. Article 2. The term "stock-pledged loans" mentioned in the present Measures refers to the loans provided by commercial banks to securities companies that use proprietary stocks, securities investment fund certificates or convertible bonds issued by listed companies as pledge. Article 3. The term "pledge" mentioned in the present Measures refers to RMB common stocks in proprietary trading by securities companies and listed and traded in the securities exchange (A shares), notes of securities investment fund certificates and convertible bonds issued by listed companies (hereinafter referred to stock). Article 4. The term "borrowers" mentioned in the present Measures refers to securities companies (head office of the legal entity) legally established and approved by the China Securities Regulatory Commission to engage in the securities proprietary business. The term "lenders" herein refers to the legally established commercial banks that conduct stock-pledged loan business with the approval of the China Banking Regulatory Commission (hereinafter referred to commercial banks). In the present Measures, the securities registration and clearing institution refers to the legal registration and clearing institution of the pledge. Article 5. Where a commercial bank authorizes any of its branches to handle the business of stock-pledged loans, it shall report to the CBRC for archival purposes. Article 6. The use of a stock-pledged loan of a borrower shall meet the requirements as prescribed in the Securities Law of the People's of China. Such a loan shall be used for replenishing the shortage of circulating fund only. Article 7. The People's Bank of China and the CBRC shall supervise the stock-pledged loan business. CHAPTER II LENDERS AND BORROWERS Article 8. A lender who applies for engaging in the stock-pledged loan business shall satisfy the following requirements: (1) Its capital adequacy ratio and other supervisory indicators meet the relevant requirements of the CBRC; (2) It has a sound internal control mechanism and has established and implemented a centralized lending system; (3) It has formulated risk control measures and operation procedures for the stock-pledged loan business; (4) It has professional departments and personnel to be responsible for the operation and management of stock-pledged loan business; (5) It has a special business management information system, can timely learn of the stock market situation and important information of listed companies, and is capable of analyzing and studying categorized stocks as well as determining the pledge ratios thereof; and (6) Other conditions as prescribed by the CBRC. Article 9. A borrower shall meet the following requirements: (1) Its assets are of adequate liquidity and it is able to repay the principal and interests of the loan; (2) Its self-operation businesses meet the relevant provisions of the CSRC on risk control ratios; (3) It has retained enough loan loss reserves as required by the CSRC; (4) It has regularly disclosed its balance sheets, net assets calculation statements, profit statements, profit distribution statements and other information as required by the CSRC; (5) During the recent one year, it has no record of serious violation of regulation or discipline, or special risk as determined by the CSRC, and none of its senior managerial personnel and main professionals has any bad record as determined by the CSRC; (6) The client' s transaction settlement fund has been deposited separately upon confirmation of the CSRC and hasn't been misappropriated; and (7) Other conditions as required by the lender. CHAPTER III TERM OF LOAN, INTEREST RATE AND PLEDGE RATE Article 10. The term of a stock-pledged loan shall be determined by both the borrowing and lending parties, but shall not exceed 1 year. After the expiry of the loan contract, no extension may be made. A new stock-pledged loan shall be subject to examination and approval under the present Measures. If the borrower intends to pay the loan ahead of schedule, it shall obtain the permission of the lender. Article 11. The interest rate and interest calculation method of a stock-pledged loan shall be implemented in accordance with the provisions of the People's Bank of China regarding the interest rates. Article 12. The stock used as pledge of a loan shall have good performances, appropriate amount of circulating capital and relatively high liquidity. No lender may accept any of the following stocks as a pledge: (1) The stock issued by a company that is at a loss in the previous year; (2) A stock of which the price fluctuates at a ratio exceeding 200 % (the highest price / the lowest price); (3) A stock whose circulating shares are excessively centralized; (4) A stock that is suspended or delisted in a stock exchange; (5) A stock specially disposed of by the stock exchange; or (6) Where a stock exchange holds 5% or more of the shares issued by a listed company, it shall not use the stock as a pledge; however, it isn't subject to this restriction if it holds 5% or more of the shares due to the purchase of after-sale remainder of stocks for underwriting. Article 13. The stock pledge rate shall, in light of the borrower's financial status and credit standing, be decided by the lender and the borrower through negotiation, but it shall not exceed 60%. The adjustment to the maximum stock pledge rate shall be decided by the People's Bank of China and the CBRC. The computation formula of pledge rate: The Pledge Rate = (the Principal of Loan / the Market Value of Pledged Stock) x 100% The Market Value of Pledged Stock = Number of Pledged Stock x the Average Closing Price during the Previous 7 Dealing Days CHAPTER IV PROCEDURES FOR LOANS Article 14. When a borrower applies for a stock-pledged loan, it shall submit the following materials to a lender: (1) The enterprise legal person business license, legal person code certificate and identification document of the legal representative; (2) The loan card (certificate) issued by the People's Bank of China; (3) The balance sheet, profit and loss statement and net asset calculation statement of the previous month, and the financial accounting statements of the previous year (including annotations) upon audit of an accounting (auditing) firm; (4) The certification documents issued by the securities registration and clearing institution about the rights to the pledge; (5) The basic information of the listed company whose stock is to be pledged; and (6) Other materials as required by the lender. Article 15. After the lender receives the loan application of a borrower, it shall investigate into and verify the borrower's loan purposes, credit standing, financial solvency, authenticity of materials, and the basic information about the stock to be pledged. It shall timely give the borrower a reply as well. Article 16. Before a lender grants a loan, it shall meticulously analyze the credit risks and financial solvency of the borrower, and shall determine the limit on the amount of loan to the borrower in light of the unified credit management measures. Article 17. After the lender approves the loan application of the borrower, it shall enter into a loan contract with the borrower in accordance with the relevant laws and regulations. Article 18. After the lender and borrower have concluded a loan contract, both parties shall go through the pledge registration formalities in the securities registration and clearing institution, which shall issue the lender a certification document of stock pledge registration. Article 19. Before the lender grants a stock-pledged loan, it shall set up a special seat for the stock-pledged loan business in the stock exchange so as to keep and dispose of the stock in pledge. After having granted a loan, the lender shall timely input the relevant information about the stock-pledged loan into the credit registration and consulting system. Article 20. The borrower shall repay the principal and interests of the loan according to the contractual stipulations. After the borrower pays off the loan, the loan contract terminates automatically. At the same time, the lender shall go through the pledge deregistration formalities as well as return the certification documents of stock-pledge registration to the borrower. CHAPTER V CONTROL OF CREDIT RISKS Article 21. The balance of the stock-pledged loans shall not exceed 15 % of the amount of net capital of the lender. The balance of the stock-pledged loans granted by the lender to a securities company shall not exceed 5 % of the amount of net capital of the lender. Article 22. Where a borrower is under any of the following circumstances, it shall notify the lender: (1) It is difficult to repay the principal or interests of a loan when the time is due; (2) Reducing capital, merging, splitting, dissolving or applying for bankruptcy; (3) Altering the equities; or (4) Other circumstances as stipulated in the loan contract. Article 23. A listed company's stock accepted as a pledge by a commercial bank or its branch shall not exceed 10 % of all the circulation stocks of this listed company. A listed company's stock used as a pledge by a securities company shall not exceed 10 % of all the circulation stocks of this listed company, nor may it exceed 5% of the shares already issued by the listed company. The pledged stock of listed company shall not exceed 20 % of all the circulation stocks of this listed company. The above-mentioned rates shall be subject to the supervision and control of the securities registration and clearing institution. As to the stocks exceeding the prescribed rates, the securities registration and clearing institution shall not handle the pledge registration. The People's Bank of China and the CBRC may adjust the aforesaid rates in due time. Article 24. A lender shall be entitled to verify the authenticity and lawfulness of the pledge through the securities registration and clearing institution. At the request of a lender, the securities registration and clearing institution shall timely provide it with pertinent true information. Article 25. A lender shall analyze the risks and value of each stock at any time, shall select the stocks fit for the pledged loans of this bank, and shall, in light of their respective price, profitability, liquidity and the business status and financial indicators, as well as the overall information of the stock market, make a checklist of the stocks acceptable as a pledge and the pledge rates. Article 26. A lender shall track the market value of the pledged stocks it holds and shall conduct at least one assessment of the total market value of the pledged stock of each borrower every dealing day. Article 27. A warning line and a closing line shall be set up for the purpose of controlling the risks arising from fluctuations of stock prices. The minimum rate of warning line (market value of the pledged stock / principal of loan x 100%) shall be 135%. The minimum rate of closing line (market value of pledged stock / principal of loan x 100% shall be 120%. When the ratio between the market value of a pledged stock and the principal of loan falls below the warning line, the lender shall demand the borrower to immediately replenish the gap of the pledge value resulted from the falling of the securities price. When the ratio between the market value of a pledged stock and the principal of loan falls below the closing line, the lender shall timely sell the pledged stock. The proceeds from the sale of pledged stock shall be used for repaying the principal and interests. The surplus shall be paid back to the borrower and the inadequacy shall be paid off by the borrower. CHAPTER VI PRESERVATION AND DISPOSAL OF PLEDGE Article 28. The lender shall set up a special seat for the pledged stock (hereinafter referred to the SSPS), which shall be used for preserving and disposing the pledge. It shall also open a special fund settlement account (hereinafter referred to the SFSA), which shall be used for clearing relevant funds. During the term of the loan contract, the borrower shall not transfer any stock kept under the SSPS except for the circumstance mentioned in Article 33 of the present Measures as well as other circumstances agreed to by the borrower and the lender through negotiation. Article 29. The securities registration and clearing institutions shall, according to the application of the pledger and lender, timely deposit the full amount of pledged stock under the SSPS of the lender. Article 30. The borrower may apply to the lender, and upon the consent of the lender, for concluding a new contract between both parties on partially changing (or entirely) the pledge. Upon permission of the lender, both parties shall jointly go through the formalities for the pledge modification registration in the securities registration and clearing institution. After the completion of the aforesaid formalities, the securities registration and clearing institution shall issue the lender a new stock pledge registration certificate. Article 31. During the term of the pledge contract, the borrower may apply to the lender, and upon the consent of the lender, for selling some or all of the pledge by following the instructions of the borrower. The proceeds from selling the pledge shall be deposited in the SFSA of the lender. It shall be entirely (or partly) used for repaying the loan ahead of schedule, of which the surplus shall be paid back to the borrower. Article 32. The lender shall inform the occurrence of any of the following circumstances and shall demand the borrower to provide more pledge or change the pledge or deposit more fund in the SFSA of the lender: (1) The market value of the pledge is below the warning line mentioned in Article 27 of the present Measures; or (2) Any of the circumstances mentioned in Article 12 of the present Measures. Article 33. When the market value of the pledged stock is at or below the closing line mentioned in Article 27 of the present Measures, the lender shall be entitled to unconditionally dispose of the pledged stock, from which the proceeds shall be directly used for repaying the pledged claims of the lender. Article 34. A lender shall return the pledge to the borrower when the borrower has fulfilled the obligation of repayment at the expiry of the loan contract. The lender shall be entitled to sell the pledged stock through its SSPS, if the borrower fails to repay the loan, and the proceeds from the selling shall be used for repaying the claims of lender directly. Article 35. During the term of the pledge, the propagated interests (including the scrip issue, dividends, interests, etc.) of the pledged stock shall also be pledged. Where any stock option is allotted to the pledge within the term of the pledge, the borrower shall purchase and pledge the newly issued stocks. If the borrower fails to do so and therefore causes the pledge value to decline, the pledge shall be timely replenished. CHAPTER VII PUNITIVE RULES Article 36. Where a lender commits any of the following acts, it shall be given a warning by the CBRC in accordance with the law. If the circumstance is serious, it shall be suspended or disqualified from conducting the stock-pledged loan business. (1) Conducting stock-pledged loan business without the approval of the CBRC; (2) Granting a stock-pledged loan to an unqualified securities company as stipulated in the present Measures; (3) Granting a stock-pledged loan for a term longer than 1 year; (4) Accepting a stock, which is banned by the present Measures from being pledged, as a pledge; (5) Its pledge ratio and other loan control ratios exceeding the limits as stipulated in the present Measures; (6) Failing to provide stock-pledged loans in accordance with the unified credit system and prudential principle, or (7) Divulging the important confidential information about a stock-pledged loan and the commercial secrets of the borrower. Article 37. Where a borrower commits any of the following acts, the CBRC shall, in light of the actual circumstances, give it a warning or circulate a notice, as well as investigate into and punish the pertinent liable persons: (1) Using a non-proprietary stock to obtain a stock-pledged loan; (2) Failing to use the loan by following the use as stipulated in the contract; (3) Refusing or obstructing the lender from supervising and inspecting the uses of the loan; or (4) Failing to fulfill the obligation of information disclosure in accordance with Article 9 (4) in the present Measures. Article 38. Where a securities registration and clearing institution has any of the following acts, its administrative organ shall, in light of the actual circumstances, give it a warning, circulate a notice, and investigate and punish the relevant liable persons: (1) failure to satisfy the lender requirement to verify the authenticity and legitimacy of the stock; (2) failure to satisfy the lender requirement to freeze or de-freeze the stock pledged in time (3) registering the stock pledge which exceeds the ratio stipulated in Article 23 of the current Measure; (4) purposely inflating the amount of the pledged property or issuing proof of pledge. Article 39. The People's Bank of China and its branches may propose the CBRC, CSRC and their respective dispatched institutions to conduct supervision and inspection over the acts that violate any of the present Measures. The supervisory organ shall timely send the People's Bank of China or its branch a copy of the result of investigation and punishment to such an act. CHAPTER VIII SUPPLEMENTARY PROVISIONS Article 40. A securities registration and clearing institution shall draft relevant detailed implementation rules in pursuance of the present Measures. Article 41. A commercial bank engaging in stock-pledged loan business shall draft detailed implementing rules in accordance with the present Measures and pertinent operation procedures and management system, and report it to the People's Bank of China and CBRC for archival purposes. Article 42. The relevant expenses incurred by the lender in handling stock-pledged loan business shall be shared by the lender and borrower on the basis of negotiation. Article 43. The power to interpret the present Measures shall remain with the People's Bank of China jointly with the CBRC and CSRC. Article 44. The present Measures shall be implemented as of the date of promulgation. The Administrative Measures for the Stock-pledged Loans of Securities Companies shall be abolished simultaneously. |
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