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	PROVISIONS ON THE MANAGEMENT OF FOREIGN EXCHANGE DEPOSIT RESERVE OF FINANCIAL INSTITUTION

	(Notice of the People's Bank of China on Printing and Distributing the Provisions on the Management of Foreign Exchange Deposit Reserve of Financial Institutions (No.252 [2004] of the People's Bank of China), October 29, 2004: With a view to strengthening the management on foreign exchange deposit reserve, bringing into full play the role of foreign exchange deposit reserve, and promoting the stable management of financial institutions, the People's Bank of China has formulated the Provisions on the Management of Foreign Exchange Deposit Reserve of Financial Institutions (hereinafter referred to the Provisions) in accordance with the Law of the People's Republic of China on the People's Bank of China, the Law of the People's Republic of China on Commercial Banks and other laws and regulations. The relevant issues are the following: I. The rate of deposit reserve The rate of foreign exchange deposit reserve of financial institutions shall be 3% uniformly after adjustment from the date of January 15, 2005. II. Ways of Deposit 1. The Deposit Voucher of Foreign Exchange Deposit Reserve (For the format, see Annex 2) shall be submitted to the business management department of the People's Bank of China by the Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, CITIC Industrial Bank, China Everbright Bank, Huaxia Bank, and China Minsheng Banking Corp. Ltd. If the Voucher is up to the standard after being examined by the business management department of the People's Bank of China, the aforesaid banks shall handle formalities for transferring money to the business management department of the People's Bank of China. 2. The Deposit Voucher of Foreign Exchange Deposit Reserve shall be submitted to the branches and sub-branches of the People's Bank of China at the locality of their legal persons by the Bank of Communications, Guangdong Development Bank, Shenzhen Development Bank Co., Ltd., China Merchants Bank, Shanghai Pudong Development Bank, Industrial Bank Co., Ltd., Evergrowing Bank, and China Zheshang Bank Co., Ltd.. If the Voucher is up to the standard after being examined by the branches and sub-branches of the People's Bank of China at their localities, the aforesaid banks shall go through formalities for transferring money to the business management department of the People's Bank of China. 3. The Deposit Voucher of Foreign Exchange Deposit Reserve shall be submitted to the branches and sub-branches of the People's Bank of China by their legal person institutions (or each branch and sub-branch of the foreign banks) at the locality of the city commercial banks, rural commercial (cooperative) banks, urban credit cooperatives, rural credit cooperatives, financial companies of an enterprise group, and foreign-funded financial institutions at the capital cities of the provinces (including municipalities directly under the Central Government, hereinafter referred to as the provincial capital cities), and at Shenzhen city. If the Voucher is up to the standard after being examined by the business departments of the branches and sub-branches of the People's Bank of China, the aforesaid financial institutions shall handle formalities for money transfer to the branches and sub-branches of the People's Bank of China at their localities. 4. The Deposit Voucher of Foreign Exchange Deposit Reserve shall be submitted to the sub-branches of the People's Bank of China by their legal person institutions (or each branch and sub-branch of the foreign banks) at the localities of the city commercial banks, rural commercial (cooperative) banks, urban credit cooperatives, rural credit cooperatives, financial companies of an enterprise group, and the foreign-funded financial institutions of the non-provincial capital cities. If the Voucher is up to the standard after being examined by the business departments of the sub-branches of the People's Bank of China, the aforesaid financial institutions shall handle formalities for money transfer to the branches of the People's Bank of China (business management departments or central sub-branches of the provincial capital cities) at their provinces, autonomous regions, and municipalities directly under the Central Government. 5. The business management department of the People's Bank of China shall be responsible for handling the foreign exchange reserve deposits of state-owned commercial banks, joint stock commercial banks, and the foreign-funded financial institutions, city commercial banks, rural cooperative banks, urban credit cooperatives, rural credit cooperatives, and financial companies in Beijing, and for the work of allocating or increasing (or decreasing) the foreign exchange reserve deposits collected by the branches of the People's Bank of China (business management department of Chongqing city, or central sub-branch bank of provincial capital cities and Shenzhen city). The branches of the People's Bank of China (business management department of Chongqing city, or central sub-branch banks of provincial capital cities and Shenzhen city) shall be responsible for handling the allocation or increase (or decrease) of the foreign exchange reserve deposits of foreign-funded financial institutions, city commercial banks, rural cooperative banks, urban credit cooperatives, and rural credit cooperatives within their own jurisdictions. 6. The branches of the People's Bank of China (business management department of Chongqing city, or central sub-branch banks of provincial capital cities and Shenzhen city) shall open special accounts for foreign exchange reserve deposits at the Bank of China of their localities. The branches of the People's Bank of China (business management department of Chongqing city, or central sub-branch banks of provincial capital cities and Shenzhen city) shall transfer the foreign exchange reserve deposits they have collected to the special account for foreign exchange reserve deposits opened at the Bank of China by the business management department of the People's Bank of China before the date of 20 each month. In case there is any return of the reserve, the business management department of the People's Bank of China shall transfer the foreign exchange reserve deposits to the special account for foreign exchange reserve deposits opened at the Bank of China by the branches of the People's Bank of China (business management department of Chongqing city, or central sub-branch banks of provincial capital cities and Shenzhen city) before the 10th day of the current month (in case of long holidays, two workdays shall be added). III. Supervision and Management The currency credit department of the People's Bank of China shall be responsible for organizing the work for the management, supervision and punishment concerning foreign exchange deposit reserve. Its accounting department shall be responsible for the work of examination and approval of the accounting items within the scope of deposit of the foreign exchange reserve. And its business department shall be responsible for the work of examination on the statements of foreign exchange deposit reserve, capital collection and routine examination. The relevant departments shall strengthen information communications, cooperate closely with each other, and do a good job for the management of foreign exchange deposit reserve. IV. Miscellaneous The present Provisions shall come into force as of January 1, 2005. The relevant financial institutions shall have the foreign exchange deposit reserve transferred to the special account of foreign exchange reserve deposits opened at the Bank of China by the People's Bank of China by January 15, 2005. The date in the present Notice and its Annex shall refer to the date in Gregorian calendar, and shall be postponed to the first workday after festival or holiday in case of festivals or holidays. In order to unify the management on foreign exchange deposit reserve, any foreign-funded financial institution that fails to submit the accounting items or the statement on the items to the local branches or sub-branches of the People's Bank of China shall put on archives the accounting items and the statement on the items to the branches or sub-branches of the People's Bank of China, so as to determine the scope of deposit of the reserve. A separate notice shall be issued on the relevant business accounting measures for foreign exchange deposit reserve. Each branch and business management department of the People's Bank and the central sub-branches of the provincial capital cities shall transfer the present Notice to the city commercial banks, rural commercial (cooperative) banks, urban credit cooperatives, rural credit cooperatives, financial companies of an enterprise group, and foreign-funded financial institutions within their own jurisdictions.)


SUBJECT : FINANCIAL INSTITUTION; FOREIGN EXCHANGE DEPOSIT RESERVE
ISSUING DEPARTMENT : THE PEOPLE'S BANK OF CHINA
ISSUE DATE : 10/29/2004
IMPLEMENT DATE : 01/01/2005
LENGTH : 2,140 words
TEXT :

TABLE OF CONTENTS

CHAPTER I GENERAL PROVISIONS
CHAPTER II DEPOSIT
CHAPTER III CHECKING AND ADJUSTMENT
CHAPTER IV PUTTING TO USE
CHAPTER V LEGAL LIABILITIES
CHAPTER VI SUPPLEMENTARY PROVISIONS

CHAPTER I GENERAL PROVISIONS

Article 1. The present Provisions are formulated in accordance with the Law of the People's Republic of China on the People's Bank of China, the Law of the People's Republic of China on Commercial Banks and other laws and regulations for the purpose of strengthening management on foreign exchange deposit reserve, bringing into full play the role of foreign exchange deposit reserve and promoting the stable management of financial institutions.

Article 2. The present Provisions shall be applicable to the financial institutions that absorb foreign exchange deposits within the territory of the People's Republic of China, including: solely state-owned commercial banks, joint stock commercial banks, city commercial banks, rural commercial (cooperative) banks, urban credit cooperatives, rural credit cooperatives, and financial companies of enterprise groups, solely foreign-funded banks, Sino-foreign joint venture banks, solely foreign-funded financial companies, Sino-foreign joint venture financial companies and branches of foreign banks, as well as other financial institutions that absorb foreign exchange deposits.

Article 3. The foreign exchange deposit reserve shall refer to a proportion of foreign exchange deposits absorbed by any financial institution and deposited to the People's Bank of China as required.

The rate of foreign exchange deposit reserve shall refer to the ratio of foreign exchange deposit reserve deposited to the People's Bank of China by a financial institution to the foreign exchange deposits it has absorbed.

Article 4. The People's Bank of China shall be responsible for determining and adjusting the rate of foreign exchange reserve, and inspecting and supervising the acts of financial institutions for their implementation of provisions on the management of foreign exchange deposit reserve.

Article 5. The People's Bank of China will not compute and pay interests for the foreign exchange deposit reserve deposited by any financial institution.

CHAPTER II DEPOSIT

Article 6. The scope of foreign exchange deposit for which a financial institution shall deposit foreign exchange deposit reserve includes:

(1) The individual foreign exchange savings deposit, the entity foreign exchange deposit absorbed by a financial institution, the reserve deposit for issuance of foreign currency credit cards and other foreign exchange deposits or obligations checked and ratified by the People's Bank of China; and

(2) The credit balance after the liabilities items of foreign exchange business under the entrustment or agency of any financial institution reducing the assets items. If it is a debit balance after such reduction, the balance of liabilities items that shall be deposited will be regarded as zero. No one may deduct or reduce other balance of foreign exchange liabilities items that shall be deposited by certain debit balance.

Article 7. The People's Bank of China shall prescribe and adjust the scope of foreign exchange deposit for which a financial institution shall deposit foreign exchange deposit reserve according to the requirements for adjustment and control of currency policies.

Article 8. The accounting items matching the scope of foreign exchange deposit for which a financial institution shall deposit foreign exchange deposit reserve shall be determined by the People's Bank of China or its authorized branches and sub-branches:

(1) The accounting items matching the scope of foreign exchange deposit for which foreign exchange deposit reserve shall be deposited by any solely state-owned commercial bank, joint stock commercial bank, city commercial bank, rural commercial (cooperative) bank, urban credit cooperatives, rural credit cooperatives, and financial company of an enterprise group shall be determined by the head office of the People's Bank of China. and

(2) The accounting items matching the scope of foreign exchange deposit for which foreign exchange deposit reserve shall be deposited by any wholly foreign-funded bank, Sino-foreign joint venture bank, solely foreign-funded financial company, Sino-foreign joint venture financial company or branch of any foreign bank (hereinafter called by a joint name as foreign-funded financial institutions) shall be determined by the branch or sub-branch of the People's Bank of China at the locality of their legal person institutions (or branches of foreign banks) in light of the principles prescribed by the head office, and shall be put on records at the head office.

Article 9. The foreign exchange deposit reserve of any financial institution shall be deposited to the special foreign exchange reserve deposit account opened by the People's Bank of China at a Chinese-funded commercial bank within the territory of China:

(1) The foreign exchange deposit reserve of any solely state-owned commercial bank or joint stock commercial bank shall be delivered uniformly by their head offices to the special foreign exchange reserve deposit account opened at a Chinese-funded commercial bank by the business management department of the People's Bank of China;

(2) The foreign exchange deposit reserve of any city commercial bank, rural commercial (cooperative) bank, urban credit cooperatives, rural credit cooperatives, or financial company of any enterprise group shall be delivered by their legal person institutions to the special foreign exchange reserve deposit account, which is opened by the branches of the People's Bank of China (business management departments or central sub-branches of provincial capital cities) of their provinces (autonomous regions, and municipalities directly under the Central Government)at a Chinese-funded commercial bank within the territory of China; and

(3) The foreign exchange deposit reserve of any foreign-funded financial institution with legal person status shall be deposited by its legal person institution to the special foreign exchange reserve deposit account, which is opened at a Chinese-funded commercial bank within the territory of China by the branch and business management department of the People's Bank of China at its province (autonomous region, and municipality directly under the Central Government) or the central sub-branch of the capital city of the province (hereinafter referred to the provincial capital city). The foreign exchange deposit reserve of any branch of foreign bank shall be deposited by each branch of any foreign bank respectively to the special foreign exchange reserve deposit account, which is opened at a Chinese-funded commercial bank within the territory of China at the branch and business management department of the People's Bank of China or the central sub-branch of provincial capital cities at the province (autonomous region, and municipality directly under the Central Government).

Article 10. For US dollar or Hongkong dollar deposit, the foreign exchange deposit reserve shall be deposited on the basis of computation according to the original type of currency. The foreign exchange deposit of other types of currencies shall be delivered by converting them into dollars. The conversion rate between the various types of currencies shall be computed in light of the Conversion Rate of Various Types of Currencies to Dollars promulgated by the State Administration of Foreign Exchange every month.

CHAPTER III CHECKING AND ADJUSTMENT

Article 11. The People's Bank of China shall check the foreign exchange deposit reserve of financial institutions by month. The financial institutions shall transfer the reserve deposit to the account designated by the People's Bank of China before the 15th day of each month. From the 15th day of the current month to the 14th day of the next month, without the approval of the People's Bank of China, the proportion of the balance of foreign exchange reserve deposit of any financial institution of the current month to that of the end of last month shall be no lower than the rate of foreign exchange deposit reserve.

Article 12. A financial institution shall submit the collected deposit vouchers, monthly accountant statements and balance of foreign exchange deposits at the end of the month to the People's Bank of China at the locality of its legal person institution (or branch of a foreign bank) before the 5th day of each month.

Article 13. The People's Bank of China shall be responsible for making audit on the relevant data submitted by any financial institution.

Article 14. A financial institution shall compute the foreign exchange deposit reserve that should be deposited in the current month on the basis of the balance of foreign exchange deposit at the end of last month and the rate of foreign exchange deposit reserve. The formula for computation shall be:

The balance of foreign exchange reserve deposit of the current month = the balance of the foreign exchange deposit at the end of last month x the rate of foreign exchange deposit reserve

Article 15. In case the foreign exchange reserve deposit of any financial institution at the People's Bank of China is larger than the foreign exchange deposit reserve it should deposit in the current month, the People's Bank of China shall transfer the extra capital to the account of the financial institution before the 15th day of the current month.

CHAPTER IV PUTTING TO USE

Article 16. In case any financial institution occurs serious difficulties in payment and applies for using the foreign exchange deposit reserve, it shall report for the approval of the People's Bank of China or the branch or sub-branch authorized by the People's Bank of China.

Article 17. For any financial institution that may use the foreign exchange deposit reserve upon the approval of the People's Bank of China, the approved amount of foreign exchange deposit reserve it may use shall be deducted from the foreign exchange deposit reserve it has deposited within the time limit for approval, and the formula for computation is as follows:

The balance of foreign exchange reserve deposits of the current month = the balance of the foreign exchange deposit at the end of last month x the rate of foreign exchange deposit reserve - the approved amount of foreign exchange deposit reserve that may be used

Article 18. The People's Bank of China shall manage the foreign exchange deposit reserve that may be used by a financial institution in a special account, and a special person shall take charge of it.

Article 19. The foreign exchange deposit reserve used by a financial institution shall be used as required and shall not be appropriated.

CHAPTER V LEGAL LIABILITIES

Article 20. In case any Chinese-funded commercial bank fails to deposit the foreign exchange deposit reserve in light of the proportion prescribed by the People's Bank of China, it shall be subject to the punishment prescribed in Article 77 of the Law of the People's Republic of China on Commercial Banks. If it violates the provisions of Article 12 of the present Provisions, it shall be subject to the punishment prescribed in Article 80 of the Law of the People's Republic of China on Commercial Banks. In case any Chinese-funded financial company fails to deliver the foreign exchange deposit reserve in light of the proportion prescribed by the People's Bank of China and violates the provisions of Article 12 of the present Provisions, it shall be subject to the punishment prescribed in Article 46 of the Law of the People's Republic of China on the People's Bank of China. In case any foreign-funded financial institution fails to deliver the foreign exchange deposit reserve in light of the proportion prescribed by the People's Bank of China, it shall be subject to the punishment prescribed in Article 45 of the Regulation of the People's Republic of China on the Management of Foreign-funded Financial Institutions. If it violates Article 12 of the present Provisions, it shall be subject to the punishment prescribed in Article 47 of the Regulation of the People's Republic of China on the Management of Foreign-funded Financial Institutions.

Any financial institution that corrects the aforesaid illegal acts in time on its own initiative shall be given a lighter punishment or under the mitigation of punishment below the minimum statutory prescript in accordance with the provisions of Articles 5 and 27 of the Administrative Punishment Law of the People's Republic of China.

Article 21. In case the People's Bank of China has any of the following acts, the leader in charge who is directly responsible and the personnel who are directly liable shall be subject to the administrative punishment according to the relevant laws and regulations on the basis of their circumstances:

(1) Failing to take correction and punishment measures in time when discovering any act of any financial institution violating the regulations of the present Provisions;

(2) Embezzling without permission the foreign exchange deposit reserve of any financial institution;

(3) Approving any financial institution to use foreign exchange deposit reserve without permission by exceeding the power of examination and approval; or

(4) Not doing a good job in supervising the use of foreign exchange deposit reserve by any financial institution.

CHAPTER VI SUPPLEMENTARY PROVISIONS

Article 22. The power to interpret and amend the present Provisions shall remain with the People's Bank of China.

Article 23. The present Provisions shall come into force as of January 1, 2005. The Measures for the Management of Payment and Deposit of Deposit Reserve by Foreign-funded Financial Institutions as promulgated by the People's Bank of China on May 40, 1996 and the Provisions on Foreign Exchange Deposit Reserve Management promulgated on December 1, 1996 shall be repealed simultaneously.