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TABLE OF CONTENTS CHAPTER I GENERAL PROVISIONS CHAPTER II CONNECTED PARTIES CHAPTER III CONNECTED TRANSACTIONS CHAPTER IV MANAGEMENT OF CONNECTED TRANSACTIONS CHAPTER V LEGAL LIABILITIES CHAPTER VI SUPPLEMENTARY PROVISIONS CHAPTER I GENERAL PROVISIONS Article 1. In order to strengthen the prudent supervision, to regulate the connected transactions of commercial banks, to control the risks in connected transactions and to promote the commercial banks to operate safely and soundly, the present Measures are formulated 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 and other laws and regulations. Article 2. The term "commercial banks" mentioned in the present Measures refers to the commercial banks lawfully established within the territory of the People's Republic of China, including Chinese-funded commercial banks, wholly foreign-funded banks and Sino-foreign equity joint banks. Article 3. The connected transactions of commercial banks shall be consistent with the principle of good faith and fairness. Article 4. The connected transactions of commercial banks shall be consistent with the laws, the administrative regulations, the uniform accounting system of the state and the relevant regulations on banking supervision. The connected transactions of a commercial bank shall, according to the business principle, be conducted on terms not more favorable than the similar transactions conducted with non-connected parties. Article 5. China Banking Regulatory Commission (hereinafter referred to CBRC) shall conduct supervision over the connected transactions of commercial banks in accordance with the law. CHAPTER II CONNECTED PARTIES Article 6. The connected parties of a commercial bank include the connected natural persons, legal persons or other organizations. Article 7. The connected natural persons of a commercial bank shall include the following: (1) The insiders of the commercial banks; (2) The major natural person shareholders of the commercial bank; (3) The close relatives of the insiders and the major natural-person shareholders of the commercial bank; (4) The natural-person controlling shareholders, directors and major managerial personnel of the connected legal persons or other organizations of the commercial bank. The "connected legal persons or other organizations" mentioned herein do not include the legal persons or other organizations that are directly, indirectly or jointly controlled by, or may be greatly influenced by the commercial bank's insiders, major natural person shareholders and their close relatives; and (5) Other natural persons that have an important influence on the commercial bank. The "insiders of a commercial bank" refer to the commercial bank's directors, the senior managerial personnel of the head office and branches, and other persons who have power to decide or participate in the commercial banks' credit extension and transfer of assets. The "natural person shareholders" refer to the natural person shareholders who hold or control more than 5% of the shares or voting rights of the commercial bank. The shares or voting rights held or controlled by the close relatives of the natural-person shareholders and the shares or voting rights held or controlled by these natural-person shareholders shall be calculated in a consolidated way. The "close relatives" mentioned in the present Measures include the parents, spouses, brothers and sisters and their spouses, adult sons and daughters and their spouses, the spouses' parents, the spouses' brothers and sisters and their spouses, the brothers and sisters of their parents and their spouses, their parents' adult sons and daughters and their spouses. Article 8. The connected legal persons or other organizations of a commercial bank include the following: (1) The major non-natural-person shareholders of the commercial bank; (2) The legal persons and other organizations directly or indirectly controlled, together with the commercial bank, by the same enterprise; (3) The legal persons or other organizations that are directly, indirectly or jointly controlled by, or may be greatly influenced by the commercial bank's insiders and major natural-person shareholders and their close relatives; and (4) Other legal persons or organizations that directly, indirectly or jointly control the commercial bank, or may have an important influence on the commercial bank. The "the major non-natural-person shareholders" mentioned in the present Measures refer to the major non-natural person shareholders who are able to directly, indirectly or jointly hold or control more than 5 % of the shares or voting rights of the commercial bank. The "legal persons or other organizations" mentioned in the present Measures exclude the commercial banks. The "enterprises" mentioned in the first paragraph of this Article exclude state-owned asset management companies. Article 9. The term "control" mentioned in the present Measures means that one has power to decide the personnel affairs, finance affairs and operating resolutions of a commercial bank, legal person or any other organization, and may benefit from its operating activities. The term "jointly control" mentioned in the present Measures means to control an economic activity jointly according to the contractual stipulations or concerted action. The term "important influence" mentioned in the present Measures refers to the one that has no power to decide the personnel affairs, finance affairs and operating decisions of a commercial bank, a legal person or any other organization, but it is able to participate in making resolutions by way of appointing persons in the board of directors or in the operating decision-making institution or by other means. Article 10. After the agreement reached or the arrangement made between one and a connected party of a commercial bank takes effect, the natural persons, legal persons or other organizations meet the above-mentioned conditions for connected parties shall be deemed as the connected parties of the commercial bank. Article 11. A natural person, legal person or any other organization, which fails to abide by the business principle when it unfairly conducts transactions listed in Article 18 of the present Measures, obtains benefits from these transactions and causes losses to the commercial bank due to having an influence over the commercial bank, shall be deemed as the connected party according to the principle of substance over form. Article 12. The directors, the senior managerial personnel of the head office of a commercial bank shall, within 10 working days from the day when they start to take their positions, report their close relatives and connected legal persons or other organizations listed in Article 8 (3) of the present Measures to the connected transactions control commission of the commercial bank. The natural persons shall do so within 10 working days from the day when they become the major natural-person shareholders. If any of the reported matters is changed, a report shall be made within 10 working days after it is changed. In a branch of a commercial bank, the senior managerial personnel and the persons who have the power to decide or participate in the credit extension and transfer of assets shall report the close relatives and the connected legal persons or other organizations listed in Article 8 (3) of the present Measures in pursuance of the connected transaction management system of the commercial bank. Article 13. The legal persons or any other organizations shall, within 10 working days from the day when it becomes the non-natural person shareholders of a commercial bank, report the following information related to their connected parties to the connected transactions control commission of the commercial bank: (1) The controlling natural-person shareholders, directors and important managerial personnel; (2) The controlling non-natural-person shareholders; (3) The legal persons or other organizations directly, indirectly or jointly controlled by them, and their directors and important managerial personnel. If any of the reporting matters listed in the first paragraph of this Article is changed, it shall be reported to the connected transactions control commission of the commercial bank within 10 days after it is changed. Article 14. With regard to a natural person, legal person or any other organization who is obliged to report in accordance with Articles 12 and 13, it shall give a written statement to the commercial bank besides a report so as to guarantee the authenticity, exactness and completeness of the reported information and promise that he/it is liable for making the corresponding compensations if any false information or serious omission in the report results in any loss to the commercial bank. Article 15. The connected transactions control commission of the commercial bank shall be responsible for determining the connected parties of the commercial banks and reporting to the board of directors and the board of supervisors. The connected transactions control commission of the commercial bank shall announce the connected parties upon its confirmation to the relevant personnel of the commercial bank. Article 16. When performing the routine tasks, if any of the personnel of a commercial bank finds that any natural person, legal person or any other organization meets the requirements for a connected party, but fails to be determined as one, he shall timely report it to the connected transactions control commission of the commercial bank. Article 17. The CBRC shall have power to determine the connected natural persons, legal persons or other organizations in accordance with the law. CHAPTER III CONNECTED TRANSACTIONS Article 18. The "connected transactions of a commercial bank" include the following matters related to the transfer of resources or obligations between the commercial bank and the connected parties: (1) Extension of credits; (2) Transfer of assets; (3) Provision of services; and (4) Other connected transactions prescribed by the CBRC. Article 19. The term "extension of credits" refers to the activities that the commercial bank directly provides monetary support for its clients or offers guarantees for the compensation or payment liability that may arise in the relevant economic activities of the clients, including the consolidated and unconsolidated businesses such as loan, loan commitment, honor, discount, repurchase of securities, trade financing, letter of credit, factoring, letter of guaranty, overdraft, inter-bank lending, and guaranty, etc. Article 20. The term "transfer of assets" refers to the dealings of the commercial bank's own movables and immovable, the dealings of credit assets and the acceptance and settlement of the offsetting-debt assets. Article 21. The term "provision of services" refers to the provision of services related to credit-standing evaluation, asset assessment, auditing and law, etc. Article 22. The connected transactions of a commercial bank are classified into general connected transactions and important connected transactions. A general connected transaction refers to a single transaction conducted between the commercial bank and a connected party on condition that the transaction amount is not more than 1% of the net capital of the commercial bank and after this transaction, the balance of the commercial bank and the connected party is not more than 5% of the net capital of the commercial bank. An important connected transaction refers to a single transaction conducted between the commercial bank and a connected party on condition that the transaction amount is not less than 1% of the net capital of the commercial bank and after this transaction, the balance of the commercial bank and the connected party is not less than 5% of the net capital of the commercial bank. When calculating the transaction balance between a connected natural person and the commercial bank, one shall consolidate the transactions between the commercial bank and the close relatives of the connected natural person. When calculating the transaction balance between a connected legal person or any other organization and the commercial bank, one shall consolidate the commercial bank and the legal persons or other organizations constituting a group of clients. CHAPTER IV MANAGEMENT OF CONNECTED TRANSACTIONS Article 23. A commercial bank shall formulate the connected transaction management system, which shall cover the supervision and management conducted by the board of directors or other operating decision-making institutions on connected transactions, the duties of the connected transactions control commission and the composition of personnel, the collection and management of the information of connected parties, the reports and commitments of connected parties, the identification and confirmation system, the categories and connected transactions and pricing policies, the examination and approval procedures and standards, the withdrawal system, the internal audit and supervision, the information disclosure and the punishment measures, etc. The connected transaction management system of a commercial bank shall be submitted to the CBRC for archival purposes. Article 24. The board of directors of a commercial bank shall establish the connected transactions control commission, which shall be responsible for the management of connected transactions, shall timely examine and approve the connected transactions, and shall control the risks therein. The connected transactions control commission shall consist of at least 3 members, and the person-in-charge therein shall be an independent director. With regard to a commercial bank that fails to establish a board of directors, its operating decision-making institution shall establish the connected transactions control commission. The office of the board of directors of the commercial bank shall be responsible for the routine affairs of the connected transactions control commission of the commercial bank. If the commercial bank fails to establish a board of directors, it shall designate a special department to be responsible for the said routine affairs. Article 25. The general connected transactions shall be subject to examination and approval according to the internal authorization procedure of the commercial bank, and shall be reported to the connected transactions control commission for archival purposes and for approval. The general connected transactions may be subject to examination and approval according to the procedure for important connected transactions. An important connected transaction shall, upon the examination of the connected transactions control commission of the commercial bank, be submitted to the board of directors for approval. If there is no board of directors, it shall, upon the examination of the connected transactions control commission, be submitted to the operating decision-making institution for approval. An important connected transaction shall be reported to the board of supervisors within 10 working days form the day when it is approved, and shall simultaneously be reported to the CBRC. A connected transaction, with which the directors of the commercial bank and the senior managerial personnel of the head office are connected, shall be reported to the board of supervisors within 10 working days from the day when it is approved. Article 26. When the board of directors of a commercial bank, the operating decision-making institution of a commercial bank without a board of directors or the connected transactions control commission votes on or makes a decision about a connected transaction, the persons who are connected with the connected transaction shall withdraw. Article 27. The independent directors of a commercial bank shall issue written opinions on the fairness of the important connected transactions and the execution of the internal examination and approval procedure. Article 28. After extending a credit to a connected party, the commercial bank shall strengthen the follow-up management, shall monitor and control the risks. Article 29. No commercial bank may extend un-guaranteed loans to the connected parties. No commercial bank may extend any credit by accepting its own stock rights as a pledge. No commercial bank may provide a guaranty for the financing activity of a connected party, except when the connected party provides enough bank deposits certificates or state debts as a counter-guaranty. Article 30. Where a commercial bank suffers any loss due to the extension of credit to a connected party, it shall not extend any credit to this connected party within 2 years, but, except when it is approved by the board of directors of the commercial bank, or by the operating decision-making institution of the commercial bank without a board of directors, for the purpose of reducing the said loss. Article 31. Where a connected transaction of a commercial bank is vetoed, it shall not be deliberated within 6 months. Article 32. The balance of the credits extended to the connected party by a commercial bank shall not exceed 10% of the net capital of the commercial bank. The total balance of the credits extended to the group clients, to whom a connected party or any other organization belongs, shall not exceed 15% o the net capital of the commercial bank. The balance of the credits extended to all connected parties shall not exceed 50 % of the net capital of the commercial bank. When calculating the balance of credits, one may deduct the amount of the deposits as security and the certificates of bank deposits and state debts as pledge provided by the connected parties. Article 33. The CBRC may, according to the status of the risks of the connected transaction of a commercial bank, cut down the proportion of the balance of one connected party or all connected parties in the net capital. Article 34. No commercial bank may hire an accounting firm controlled by a connected party to conduct auditing for the bank. Article 35. The internal auditing department of a commercial bank shall conduct at least one special auditing on the connected transactions of the bank every year, and shall report the auditing result to the board of directors and the board of supervisors of the commercial bank. If there is no board of directors, the auditing results shall be reported to the operating decision-making institution and the board of supervisors. Article 36. The board of directors of a commercial bank shall submit a special report about the implementation of connected transaction management system and the status of connected transactions to the assembly of shareholders every year. The status of connected transactions shall cover the connected parties, the types of transactions, the amount and subject matters of transactions, transaction price and way of pricing, the transaction yields and loss, and the natures and weights of the rights and interests of the connected parties in the transactions. If there is no board of directors, the operating decision-making institution of the commercial bank shall make a special report to the board of supervisors. Article 37. A commercial bank shall submit quarterly reports about the status of connected transactions to the CBRC. Article 38. A commercial bank, when disclosing information according to the Interim Measures for the Information Disclosure of Commercial Banks, shall disclose the following matters of the connected parties and connected transactions in the notes of the accounting statements: (1) Natures of the relationships between the connected parties and the commercial bank; (2) The basic information about the connected natural persons; (3) The names, economic natures or types, main businesses, legal representatives, registration places, registered capital and changes of the connected legal persons or other organizations; (4) The shares or rights and interests of the commercial bank held by the connected parties and the changes thereof; (5) The main content of the agreement signed according to Article 10 of the present Measures; (6) The types of connected transactions; (7) The amount of connected transactions and the corresponding proportions; (8) The amount of unsettled connected transactions and the corresponding proportion; (9) The pricing policies of connected transactions; and (10) Other matters that the CBRC deems necessary to be disclosed. The important connected transactions shall be disclosed one by one, and the general connected transactions may be disclosed in a consolidated way. As to the connected natural persons who haven't had connected transactions with the commercial bank or the connected legal persons or other organizations enumerated in Paragraph 3, Article 8 of the present Measures, who haven't had connected transactions with the commercial bank, the commercial bank may not disclose the relevant information. A commercial bank, which isn't required to disclose information or isn't required to do so for the time being under the Interim Measures for the Information Disclosure of Commercial Banks, shall disclose the matters listed in this Article through the local major newspapers within one month after the end of each fiscal year. CHAPTER V LEGAL LIABILITIES Article 39. Where the shareholders of a commercial bank force the commercial bank to have carried out any of the following activities through their influence on it, the CBRC may limit the rights of these shareholders in light of the different circumstances. If the circumstance is serious, it may order the liable controlling shareholders to transfer their stock rights: (1) Failing to conduct the connected transactions according to Article 4 of the present Measures and having caused losses to the commercial bank; (2) Failing to examine and approve the connected transactions in accordance with Article 25 of the present Measures; (3) Extending un-guaranteed credits to the connected parties; (4) Providing guaranties for the financing activities of connected parties in violation of the present Measures; (5) Extending credits by accepting the commercial bank' own stock rights as a pledge; (6) Hiring an accounting firm controlled by a connected party to conduct auditing for the bank; (7) Granting balance of the credits to the related parties more than the proportion of the present Measures; (8) Failing to disclose information according to Article 38 of the present Measures. Article 40. Any of the directors or senior managerial personnel of a commercial bank who is under any of the following circumstance shall be ordered to get right within a time limit by the CBRC. If he (she) fails to do so or the circumstance is serious, the CBRC may order the commercial bank to replace the him (her): (1) Failing to report the required matters in accordance with Article 12 of the present Measures; (2) Failing to make commitments according to Article 14 of the present Measures; (3) There is any false information or serious omission in the report made by him or her; (4) Failing to withdraw in accordance with Article 26 of the present Measures; or (5) The independent director fails to issue written opinions in accordance with Article 27 of the present Measures. Article 41. Where a commercial bank fails to report the important connected transactions or submit the reports about the connected transactions to the CBRC, it shall be ordered to get right by the CBRC. If it fails to do so, it shall be imposed upon a fine of not less than 100, 000 Yuan but not more than 300, 000 Yuan. Article 42. A commercial bank shall be ordered to get right by the CBRC as well as be imposed upon a fine of not less than 200, 000 Yuan but not more than 500, 000 Yuan, if it is under any of the following circumstances: (1) It fails to conduct connected transactions in accordance with Article 4 of the present Measures, and causes losses to the commercial bank; (2) It fails to examine and approve the connected transactions in accordance with Article 25 of the present Measures; (3) It extends un-guaranteed loans to the connected parties; (4) It provides guaranties for any connected party's financing activity in violation of the present Measures; (5) It extends any credit by accepting the stock rights of the bank as a pledge; (6) It hires the accounting firm controlled by a connected party to conduct auditing for the bank; (7) The balance of the credits extended to the connecting parties exceeds the ratio prescribed in the present Measures; (8) It fails to disclose information in pursuance of Article 38 of the present Measures; or (9) It fails to implement the supervisory measures specified in Articles 39 and 40 of the present Measures. Article 43. With regard to a commercial bank violating any of the circumstances listed in Article 42 of the present Measures, it shall be ordered by the CBRC to give a disciplinary sanction to the direct liable directors, senior managerial personnel and other direct liable persons. If the circumstance is serious, the CBRC may directly deprive the liable directors and senior managerial personnel of their qualifications for being appointed as directors and senior managerial personnel for 1-10 years or prohibit them from working in the banking industry within a time period, may prohibit other direct liable persons from working in the banking industry with a time period. If no crime is constituted, the CBRC may impose a fine of not less than 50, 000 Yuan but not more than 500, 000 Yuan on the direct liable directors, senior managerial personnel and other direct liable persons. If any crime is constituted, the said direct liable directors, senior managerial personnel and other direct liable persons shall be subject to the criminal liabilities. CHAPTER VI SUPPLEMENTARY PROVISIONS Article 44. The "net amount of capital" mentioned in the present Measures refers to the net amount of capital by the end of last quarter. In the present Measures, the term "not less than" shall exclude the figures thereafter, the term "not more than" shall include the figures thereafter. Article 45. The connected transactions of the branches of foreign banks, rural cooperative banks and urban credit cooperatives shall be conducted by referring to the present Measures. Article 46. The power to interpret the present Measures shall remain with the CBRC. Article 47. The present Measures shall be implemented as of May 1, 2004. If any provisions in the relevant regulations, rules and other regulatory documents promulgated before the present Measures are implemented are contrary to the present Measures, the latter shall be followed. |
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