Circular of China Banking Regulatory Commission on Issues Concerning Banking Supervision in China (Shanghai) Free Trade Zone
Yin Jian Fa  No. 40
To all offices of the China Banking Regulatory Commission (“CBRC”), policy banks, state-owned commercial banks, joint-stock commercial banks, financial asset management companies, the postal savings bank, trust companies supervised directly by the CBRC, financial companies of enterprise groups and finance leasing companies:
According to the decision of Central Committee of the Communist Party of China and the State Council on establishing the China (Shanghai) Pilot Free Trade Zone (“FTZ”), upon the approval of the State Council, notice on relevant issues concerning banking supervision in the FTZ is as follows:
1. Chinese-funded banks are supported to develop business in the FTZ. National Chinese-funded commercial banks, policy banks, banks in Shanghai are allowed to establish new branches or special institution in the FTZ. The existing bank outlets in the FTZ are allowed to upgrade to branches or sub-branches. The establishment of new FTZ branches and upgrading existing FTZ outlets to branches/sub-branches will not be restricted by the banks' annual branch establishment plan.
2. Establishment of non-banking finance companies in the FTZ is supported. Qualified large enterprise groups in the FTZ are supported to establish group finance companies; qualified investors are supported to establish auto finance companies and consumer finance companies in the FTZ; trust companies in Shanghai are supported to relocate into the FTZ; national financial asset management companies are supported to establish branches in the FTZ; finance leasing companies are supported to establish specialized subsidiaries in the FTZ.
3. Foreign-invested banks are supported to carry out business in the FTZ. Qualified foreign-invested banks are allowed to set up subsidiaries, branches, special institutions and Sino-foreign equity joint-venture banks in the FTZ. Sub-branches in the FTZ of foreign-invested banks are allowed to upgrade to branches. Studies will be conducted with the aim to properly shortening the statutory period for a FTZ representative office of a foreign bank to be allowed to upgrade to a branch, and the statutory period for a FTZ branch of a foreign bank to be allowed to carry out RMB business.
4. Private capitals are supported to enter into the banking industry in the FTZ. Qualified private investors are supported to set up banks, finance leasing companies, consumer finance companies and other finance institutions which shall assume their own risks in the FTZ. Qualified private investors are supported to participate in setting up Sino-foreign equity joint-venture banks with other Chinese or foreign financial institution investors.
5. Cross-border investment and financing service is encouraged in the FTZ. Banking financial institutions in the FTZ are supported to carry out cross-border financing business, including but not limited to commodity trade finance, whole supply chain finance, offshore vessel finance, financial support to modern service sectors, onshore loans against offshore guarantees, commercial instruments, etc. Banking financial institutions in the FTZ are supported to promote finance services for cross-border investments, including but not limited to cross-border M&A loans and project loans, guaranty for offshore loans, cross-border assets management and wealth management business, real estate investment trust, etc.
6. Offshore business is supported in the FTZ. Qualified Chinese banks are allowed to engage in offshore banking business in the FTZ.
7. The administration on market access will be simplified in the FTZ. For banks' sub-branches (including branch offices below the sub-branch tier) in the FTZ, a reporting requirement, instead of the existing pre-approval, will be applied for items in respect of the qualifications of the branch office, senior management and certain business permission. A "green channel" will be set up to grant the market access for banking industry in the FTZ to enhance the administration efficiency by setting time limits for certain items.
8. The supervision and government service system will be improved. The CBRC supports to explore and establish a relatively independent banking supervision system which meets the actual needs of the banking industry in the FTZ and serves the purpose of effective risk control. The CBRC supports to establish a sound reporting and monitoring system to well address the risk features of the banking industry in the FTZ and appropriately adjust the utilization of certain monitoring indictors such as loan-to-deposit ratio, liquidity ratio, etc. to better serve the supervision needs.
28 September 2013
(The document shall be sent to foreign-invested banking financial institutions with legal person status, branches of foreign banks and banking financial institutions in Shanghai)