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	CIRCULAR OF THE STATE ADMINISTRATION OF FOREIGN EXCHANGE ON THE RELEVANT ISSUES REGARDING THE SETTLEMENT AND SALES OPERATION OF FOREIGN EXCHANGE CONDUCTED BY RURAL COOPERATIVE FINANCIAL INSTITUTIONS

	(No. 90[2005] of the State Administration of Foreign Exchange December 5, 2005)


SUBJECT : RURAL COOPERATIVE FINANCIAL INSTITUTIONS; FOREIGN EXCHANGE SETTLEMENT AND SALES OPERATION
ISSUING DEPARTMENT : THE STATE ADMINISTRATION OF FOREIGN EXCHANGE
ISSUE DATE : 12/05/2005
IMPLEMENT DATE : 12/05/2005
LENGTH : 1,308 words
TEXT :

In order to further improve the administration of the settlement and sales operation of foreign exchange conducted by rural cooperative financial institutions and according to the Interim Measures of Designated Foreign Exchange Banks on the Administration of the Settlement and Sales Operation of Foreign Exchange (Order No. 4 [2002] of the People's Bank of China, hereinafter referred to as the Interim Measures) and Circular of the People's Bank of China on the Administration of the Settlement and Sales Operation of Foreign Exchange (Order No. 62 [2004] of the People's Bank of China), we hereby notify the relevant issues regarding the settlement and sales operation of foreign exchange conducted by rural cooperative financial institutions as follows:

I. DEFINITION

The term "rural cooperative financial institutions" as mentioned in the present Circular includes rural credit cooperatives, rural credit cooperative unions, associate rural credit cooperative unions and rural cooperative banks.

II. REQUIREMENTS

A rural cooperative financial institution that applies for engaging in the settlement and sales operation of foreign exchange shall not only meet all the conditions as prescribed in Article 12 (except item (3)) of the Interim Measures but also meet the following requirements:

(1) Having the qualification for undertaking the foreign exchange business as approved by the regulatory body in the banking sector with no restriction on business term and a business scope that at least includes deposit, loans, remittance and international settlement of foreign exchange; and

(2) Simultaneously satisfying the following two indicators at the end of the latest accounting year before filing any application:
1. The core capital adequacy ratio shall be no less than 4% (including 4%); and
2. The non-performing loans (NPL) ratio shall be no more than 10% (including 10%).

The administrative caliber of the regulatory body in the banking sector shall be applied to core capital adequacy ratio and NPL ratio.

III. ASSESS PROCEDURES FOR RURAL COOPERATIVE FINANCIAL INSTITUTIONS TO ENGAGE IN THE SETTLEMENT AND SALES OPERATION OF FOREIGN EXCHANGE

(1) Where any rural cooperative financial institution applies for engaging in the settlement and sales operation of foreign exchange, its legal person shall file an application with a branch or sub-branch of the local state foreign exchange bureau (hereinafter referred to as the foreign exchange bureau) and the application shall be subject to the examination and approval of a branch of the foreign exchange bureau. In particular, the rural credit cooperative shall file an application based on an associate rural credit cooperative union of a county (municipality, district) or municipality (prefecture) as a unit;

(2) Where a rural cooperative financial institution applies for engaging in the settlement and sales operation of foreign exchange, it shall not only submit the documents and materials as prescribed in Article 13 of the Interim Measures (except item (3)) to the local foreign exchange bureau but also submit the following documents and materials:
1. The licensing document for the foreign exchange business as approved by the regulatory body in the banking sector; and
2. The relevant documents produced by the regulatory body in the banking sector for the confirmation of compliance with the two indicators as prescribed in item (2) of Article 2 of the present Circular;

(3) As to a rural cooperative financial institution, its branch or sub-branch (including the rural credit cooperatives under the jurisdiction of an associate rural credit cooperative union) may, 6 months after the legal person of the rural cooperative financial institution is approved for its qualification for engaging in the foreign exchange business, apply for engaging in the settlement and sales operation of foreign exchange according to the relevant provisions on administration;

(4) Where a rural cooperative financial institution applies for operating the individual purchase of foreign exchange by citizens under the item of the settlement and sales operation of foreign exchange, it shall be handled according to the relevant provisions on the administration of individual purchase of foreign exchange by citizens.

IV. STRENGTHENING THE SUPERVISION AND ADMINISTRATION OF RURAL COOPERATIVE FINANCIAL INSTITUTIONS ENGAGING IN THE SETTLEMENT AND SALES OPERATION OF FOREIGN EXCHANGE

(1) A rural cooperative financial institution that engages in the settlement and sales operation of foreign exchange shall, in strict accordance with the relevant provisions of the state on the administration of foreign exchange, earnestly perform all kinds of administrative obligations such as examination and statistical undertaking and shall carry out the settlement and sales operation of foreign exchange according to the relevant regulations. The position of foreign exchange settlement and sales operation of a rural cooperative financial institution and the settlement and sales operation of foreign exchange thereof shall be implemented according to the relevant provisions on administration such as the Interim Measures.

The legal person of a rural cooperative financial institution shall intensify the internal administration of its branches and sub-branches engaging in the settlement and sales operation of foreign exchange. Where an institutional legal person or any of its branches or sub-branches is subject to the punishment of the foreign exchange bureau or any branch or sub-branch thereof for irregularity, the institutional legal person shall not authorize any more branch or sub-branch to engage in the settlement and sales operation of foreign exchange within 6 months as of the day when an inspection and acceptance of rectification and reform is carried out;

(2) The branches and sub-branches of the foreign exchange bureau shall effectively intensify the supervision and administration of rural cooperative financial institutions engaging in the settlement and sales operation of foreign exchange.

Besides any not-on-the-spot supervision and on-the-spot examination, the branches and sub-branches of the foreign exchange bureau shall intensify the publicity of policies and regulations on foreign exchange administration and guidance on the settlement and sales operation of foreign exchange towards rural cooperative financial institutions, and supervise and urge them to organize trainings concerning the regulations on the administration of foreign exchange to their staff members in charge of the settlement and sales operation of foreign exchange. Within a year as of the day when the legal person of a rural cooperative financial institution is approved for the qualification of engaging in the settlement and sales operation of foreign exchange, the relevant branch or sub-branch of the foreign exchange bureau shall pay at least one on-the-spot return-visit to the said institutional legal person every 6 months so as to keep itself informed of the running and administration of the settlement and sales operation of foreign exchange thereof.

The branches of the foreign exchange bureau shall, according to the Circular of the State Administration of Foreign Exchange on Reporting the Information on the Financial Institutions that Engage in the Settlement and Sales Operation of Foreign Exchange (No. 21 [2005] of the State Administration of Foreign Exchange), report the information on the rural cooperative financial institutions that engage in the settlement and sales operation of foreign exchange within their jurisdiction.

The branches and sub-branches of the foreign exchange bureau shall intensify communication and coordination in regard of supervision and administration with the supervision and administration departments of the local regulatory bodies in the banking sector so as to enhance the efficiency of supervision over the settlement and sales operation of foreign exchange of rural cooperative financial institutions;

(3) Where any rural cooperative financial institution applies for stopping its settlement and sales operation of foreign exchange on its own initiative or where the qualification of any rural cooperative financial institution for engaging in the settlement and sales operation of foreign exchange is suspended or revoked, it shall be handled according to the Interim Measures.

The present Circular shall come into force as of the day of promulgation. The Circular of the General Bureau of the State Administration of Foreign Exchange on the Relevant Issues regarding the Administration of Market Assess to the Settlement and Sales Operation of Foreign Exchange for Rural Credit Cooperatives (No. 89 [2004] of the State Administration of Foreign Exchange) shall be simultaneously abolished.