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With a view to strengthening the supervision over foreign-funded banks, China Banking Regulatory Commission (CBRC) decides to make on-site inspections on some of the foreign-funded institutions with legal person status and the branches of foreign banks in the second half of the year 2003. The inspection shall take the form of unified organization, transferring personnel and centralized inspection, laying focus on two institutions with legal person status and two branches. Meanwhile, experiments of CAMELS Rating shall be made on the inspected foreign-funded institutions with legal person status, and experiment of ROCA Rating shall be made on foreign banks. Therefore, supervisors of some of the foreign-funded banks shall be selected to take part in the formulation of and training on the operation manual for CAMELS Rating and ROCA Rating, and the on-site inspection work. We hereby make the following notice on the relevant matters concerned: I. The inspection this time is the first on-site inspection on the foreign-funded banks after the establishment of CBRC, with the purpose of knowing the operation and risk conditions of the foreign-funded banks, promoting their steady management, and trying out new supervision appraisal system, and exercising the supervisory teams of the foreign-funded banks through the inspection. All the banking regulatory bureaus (hereinafter referred to bureaus) shall attach importance to the on-site inspection, strictly organize and earnestly put it into practice, and do a good job. II. All the bureaus shall, according to the "Guiding Opinions on Making On-site Inspection on Foreign-funded Institutions with Legal Person Status" (Attachment I) and the "Guiding Opinions on Making On-site Inspection on Branches of Foreign Banks with Legal Person Status" (Attachment II), and in combination with the reality of their own bureaus, plan the work of supervision over foreign-funded banks as a whole in the second half of the year 2003. All the bureaus shall, on the basis of completing the on-site inspection tasks organized and implemented uniformly by the CBRC, organize to make other on-site inspection items made on foreign-funded financial institutions within their jurisdictions. III. All the bureaus shall fill out the Statistics on Information of the Supervisors of Foreign-funded Banks (Attachment III) according to the facts, and recommend more than two supervisory professionals of the foreign-funded banks to take part in the on-site inspection work, which is organized and made uniformly, and report them to the banking supervisory department III of the CBRC through OA before September 15. Attachments: 1. Guiding Opinions on Making On-site Inspection on Foreign-funded Institutions with Legal Person Status 2. Guiding Opinions on Making On-site Inspection on Branches of Foreign Banks 3. Statistics on Information of the Supervisors of Foreign-funded Banks Attachment 1 GUIDING OPINIONS ON MAKING ON-SITE INSPECTION ON FOREIGN-FUNDED INSTITUTIONS WITH LEGAL PERSON STATUS According to the work disposition of the CBRC, an overall on-site inspection on some of the foreign-funded institutions with legal person status will be carried out in the second half of the year 2003, the inspection shall include such two parts as the inspection organized and carried out uniformly by the CBRC and the inspection arranged by each of the bureaus. In order to ensure the orderly carrying out of the work, we hereby put forward the following guiding opinions on the arrangements and requirements of the CBRC for the inspection work: I. ITEMS OF INSPECTION ORGANIZED BY THE CBRC UNIFORMLY 1. Objects to be inspected Xiemen International Bank (excluding Macao International Bank), and Ningbo International Bank 2. Purpose for the inspection To find out the business status quo, risk status and compliance conditions of the two foreign-funded institutions with legal person status, and further strengthen supervision over the foreign-funded institutions with legal person status, so as to promote their healthy development, and meanwhile, reach the goal of trying out the CAMELS Rating System and cultivate foreign-funded supervisory professionals. 3. Contents of inspection The inspection this time shall be an overall on-site inspection. It covers corporate governance structure, internal control, assets quality, profitability, capital adequacy, fluidity and compliance, and etc.. The focus is laid on the appraisal of corporate governance structure, internal control and overall risk status, and inspections on the rectification of the inspection last time, etc.. 4. Schedule The preparatory work before inspection shall be done from September to the end of October, including formulation of CAMELS Rating handbook for foreign-funded institutions with legal person status, and issuance of the questionnaires before inspection and formulation of the specific inspection plans, etc.. In the first ten days of November, the CBRC shall organize uniformly the training before the on-site inspection; and in the middle and last ten days of November, the on-site inspection shall be made officially. 5. Other requirements (1) In order to do a good job for making experiments on CAMELS Rating System, all the bureaus at the place where the foreign-funded institutions with legal person status are located shall propose opinions of amendments to the Risk Appraisal System of Commercial Banks (sending to all the relevant personnel through OA), which shall be taken as the basis for formulating the CAMELS Rating handbook of foreign-funded institutions with legal person status, and shall be sent to the Yi Xiao Mailbox of the CBRC through OA before September 20. (2) In order to attach importance to the inspection on corporate governance structure, all the bureaus at the place where the foreign-funded institutions with legal person status are located shall make research on the corporate governance structure of this kind of institutions, and according to the conditions of the foreign-funded institutions with legal person status, put forward guiding opinions on corporate governance structure of foreign-funded institutions with legal person status by referring to the Guidance for Making Corporate Governance on Share-holding Commercial Banks, Guidance to the System of Independent Directors and External Supervisors of Share-holding Commercial Banks, and the Standards for Corporate Governance of Listed Companies, and other relevant provisions, and send them to the Yi Xiao Mailbox of the CBRC through OA before the end of October. (3) Special personnel shall be designated to be responsible for the above two items of work. The bureaus shall summarize opinions reported, draft out CAMELS Rating handbook for foreign-funded institutions with legal person status and the guidance to the corporate governance structure of foreign-funded institutions with legal person status, which shall be promulgated and implemented upon approval. At the same time, on the basis of the two items of work, business professionals shall be selected to take part in the operation of the CAMELS Rating System, the training of on-site inspection and the on-site inspection on foreign-funded institutions with legal person status. II. INSPECTION ITEMS ARRANGED BY EACH OF THE BUREAUS THEMSELVES 1. All the bureaus may select inspection objects by themselves according to actual circumstances, and the institutions with legal person status, who have accepted on-site inspection or whose business has long been in a logjam may not be listed into the inspection plan of this time. 2. The bureaus arranging the inspection items by themselves may formulate inspection plans (no requirements for trial implementation of the CAMELS Rating System) by referring to the scope, content and emphasis of inspection of the CBRC on Xiamen International Bank and Ningbo International Bank, and report them to the CBRC. 3. The bureaus arranging the inspection items by themselves shall, according to the supervisory force, and on the precondition of ensuring the completion of the on-site inspection items organized uniformly by the CBRC, accurately control the progress of self-inspection, and arrange the time for inspection reasonably. 4. The bureaus arranging the inspection items by themselves shall, after the end of the inspection, submit the inspection report to the CBRC in time in the form of official documents. Attachment 2 GUIDING OPINIONS ON MAKING ON-SITE INSPECTION ON BRANCHES OF FOREIGN BANKS According to the work disposition of the CBRC for the second half of this year, we hereby put forward the following guiding opinions on the on-site inspection on branches of foreign banks, which is organized and implemented by the CBRC uniformly and the bureaus themselves: I. THE EXPERIMENT INSPECTION ON THE ROCA RATING SYSTEM ORGANIZED UNIFORMLY BY THE CBRC The CBRC shall be responsible for uniformly organizing the experiment inspection on the ROCA Rating System implemented by the WestLB AG Shanghai Branch and the Sumitomo Mitsui Banking Co. Tianjin Branch. The time for the inspection shall be the first and last ten days of November. On the occasion, the CBRC will transfer supervisory professionals from all localities to form an inspection team, and according to the ROCA Rating Handbook for Branches of Foreign Banks in China, make an inspection on the branches of the said foreign banks from such four aspects as the risk management, operation control, compliance and asset quality, and make rating item by item and comprehensively. Before making the on-site inspection, the CBRC will train the members of the inspection team on the framework and ways of ROCA Rating by stage, and the members of the team, their work division, and the specific inspection requirements and plans shall be notified by another document. II. THE ON-SITE INSPECTION MADE BY EACH OF THE BUREAUS THEMSELVES 1. Purpose for the inspection To master the overall operation and risk status of the branches of foreign banks, examine the perfection of their risk management system and procedures, and the effectiveness of the operation; to evaluate the effectiveness and independence of their internal control and audit; to examine the compliance of their management activities; and urge them to strengthen risk management and compliance operation. 2. Principles and contents for inspection (1) Principles of inspection The objects of the on-site inspection this time shall be determined according to the principle of risk supervision and durative supervision and in light of the following circumstances: not having accepted the on-site inspection for three years; not having accepted the on-site inspection after having practiced for over one year; the parent bank has any problem or the home country occurs economic and financial turbulence; abnormal change on business and financial indicators was found out through the monitoring outside the scene; being more active in carrying out new business and the derivative financial products, etc.. (2) Contents of inspection The method of overall on-site inspection shall be adopted for the inspection this time. And the contents of inspection shall include risk management, internal control, compliance, and asset quality. Attentions shall be paid to the management risk status of a foreign bank when making the inspection, and the focus shall be on the following fields: the rectification conditions of the previous inspection and the current status; the carrying out of the various on and off-balance-sheet businesses and the corresponding risk management system and internal control, especially the management and control of credit risk and liquidity risk; the conditions concerning the opening of new business, alteration of business environment and corresponding risk control; internal audit and external audit; observance of relevant laws and regulations, etc.. The inspection team may, according to the degree of support by the parent bank of the inspected institutions to the branches, the scale, business, risk level, risk control capability and the risk variation trend of the branches, determine the key fields that need to be inspected. The contents and results of the inspection this time will be taken as the basis and reference for the next on-site inspection. 3. Objects to be inspected According to the said principles and in combination with the on-site inspection in the past years, the objects to be inspected this time shall include: Italian Joint Commercial Bank Shanghai Branch, Belgium Joint Bank Shanghai Branch, Netherlands Cooperative Bank Shanghai Branch, Mizuho Corporate Bank, Ltd., Shenzhen Branch, Hang Seng Bank Shekou Branch, Wing Hang Bank Shenzhen Branch, HSBC Bank Beijing Branch, the Bank of Tokyo Mitsubishi Ltd., Beijing Branch, Bank of Montreal Beijing Branch, Korea Exchange Bank Beijing Branch, National City Bank of New York Beijing Branch, HSBC Bank Guangzhou Branch, Nanyang Commercial Bank, Ltd., Guangzhou Branch, Sumitomo Mitsui Banking Corporation Suzhou Branch, Credit Lyonnais Tainjin Branch, SHIN HAN Bank Tianjin Branch, UFJ Bank Ltd., Tianjin Branch, HSBC Bank Xiamen Branch, Chiyu Banking Corporation Limited Xiamen Branch, HSBC Bank Dalian Branch, CGD Group Zhuhai Branch, HSBC Bank Qingdao Branch, Bank of China Group (Hong Kong) Shantou Branch, Chiyu Banking Corporation Limited Fuzhou Branch, HSBC Bank Wuhan Branch, Nanyang Commercial Bank, Ltd., Haikou Branch, and the Bank of East Asia Ltd., Xi'an Branch. 4. Schedule The relevant bureaus shall establish inspection teams respectively according to the inspection arrangement, study out the inspection plans, send out questionnaires before audit, collect relevant data and information, determine the inspection plans, and send notice of inspection to the foreign-funded banks, as well as make on-site inspection from September to December. In December, the corresponding supervisory suggestions or handling measures shall be put forward according to the result of the on-site inspection, and the position papers for the audit and supervision shall be sent to the foreign-funded banks. III. OTHER REQUIREMENTS 1. Making the experiment on ROCA Rating is the focus of the inspection this time. It may test and improve the ROCA Rating handbook, and also train the supervisory professionals who can master the ROCA Rating method. All this will be of benefit to popularizing and implementing the ROCA Rating System on the branches of foreign banks nationwide in 2004. Therefore, the relevant bureaus shall attach importance to the inspection, carefully organize it, and earnestly do a good job for it. 2. The relevant bureaus may, under the condition that their work force permits, try to well arrange the implementation of the routine on-site inspection items within their own jurisdictions. After the end of the inspection, they shall report the single on-site inspection report to the leader by way of OA (sending to the Zhangkun Mailbox of the CBRC) and in writing in time. The contents of the inspection report shall include: general appraisal, statement on facts, problems and appraisal on inspection item by item; and supervisory suggestions and disposal. The report shall lay focus on the analysis on bank risk, risk management and control, including the major risk fields, ways and levels of risk management and control, problems in existence, supervisory suggestions and measures, etc.. Attachment 3 STATISTICS ON INFORMATION OF THE SUPERVISORS OF FOREIGN-FUNDED BANKS Entity filling in and making the report (signature of the responsible person): Date of filling in the report: Name: Sex: Post: Educational Background: Major: Degree of Foreign Language: Time of Starting Work: Fixed Number of Years for Taking Part in Supervisory Work: Fixed Number of Years for Taking Part in Supervision Over Foreign-funded Banks: Times for Taking Part in On-site Inspection: Work Assigned to: Contact Tel.: Recommendation Opinions: Notes: 1. Information on all the supervisors of foreign-funded banks shall be filled in and reported. 2. The "Work Assigned to" shall refer to the division of work of branch banks under control, institutions with the status of a legal person, representative office or other work division. 3. The "recommendation opinions" shall be filled in by the leaders of the supervision departments or offices of foreign-funded banks, and shall indicate whether it takes part in the inspection on foreign-funded institutions with legal person status or on the branches of foreign banks, or takes part in the compilation of the rating handbook. No recommendation opinions may be filled in if no recommendation is made. |
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