Provisional Administrative Rules on the Overseas Wealth Management Business of Commercial Banks on Behalf of Their Clients
Chapter 1 General Provisions
Article 1 These Rules are formulated according to relevant laws and administrative rules so as to regulate the overseas wealth management business of commercial banks on behalf of their clients.
Article 2 The overseas wealth management business in these Rules is defined as such a business conducted by qualified commercial banks in line with the requirement of the Rules to invest in overseas financial products with funds entrusted by domestic institutions and individuals (excluding domestic non-residents; hereinafter referred to as investors).
Article 3 The China Banking Regulatory Commission (hereinafter referred to as the CBRC) shall be responsible for licensing and regulating the operation of overseas wealth management business of commercial banks.
Article 4 The State Administration of Foreign Exchange (hereinafter referred to as the SAFE) shall be responsible for the foreign exchange limit management of the overseas wealth management business of commercial banks.
Article 5 The commercial banks shall conduct the overseas wealth management business in line with relevant state laws, regulations, foreign exchange management rules and industrial management rules and engage in investment activities according to relevant rules and regulations of investment destination countries.
Article 6 The commercial banks entrusted by domestic individuals shall follow relevant regulations on personal wealth management business to conduct overseas wealth management business. If the trustees are domestic institutions, the commercial banks shall conduct such business in reference to the relevant internal control system, risk management system and other prudential requirements on personal wealth management business.
Article 7 The commercial banks shall take effective measures to strengthen risks management when engaging in the overseas wealth management business.
Chapter 2 Business License Management
Article 8 The commercial banks shall apply to the CBRC for overseas wealth management business approval.
Article 9 The commercial banks shall be foreign exchange designated banks and meet the following conditions to conduct overseas wealth management business:
(1) Having established a sound and effective market risk management system;
(2) Having a sound internal control system;
(3) Having overseas investment management capability and experiences;
(4) Was not punished for wealth management business incompliance by the CBRC within one year prior to application;
(5) Meeting other prudential conditions as required by the CBRC.
Article 10 The commercial banks shall submit the following documents to apply for approval of overseas wealth management business (in three copies):
(1) Application letter;
(2) A description of relevant internal control and risk management system;
(3) Draft custody agreement;
(4) Other documents required by the CBRC.
Article 11 The CBRC shall examine and approve the application of a commercial bank for conducting overseas wealth management business according to relevant procedures and stipulations of administrative approval.
Article 12 With the qualification to conduct overseas wealth management business, the commercial banks shall sell wealth management products in accordance with the relevant provisions in Provisional Administrative Rules on Personal Wealth Management Business.
Commercial banks with the qualification to conduct overseas wealth management business are subject to the reporting system for market-entry management when selling wealth management products to or providing consolidated investment services for domestic institutions. The reporting process, requirements and relevant risks management shall be subject to the relevant personal wealth management rules.
Chapter 3 Limit of Foreign Exchange Purchase for Investment Purposes and Exchange Management
Article 13 Commercial banks that purchase foreign exchange with RMB to conduct overseas wealth management business on behalf of their clients shall apply to the SAFE for a limit of foreign exchange purchase.
In the case that commercial banks conduct overseas wealth management business with clients’ own foreign exchange, the amount of funds will not be included in the limit of foreign exchange purchase approved by the SAFE.
Article 14 Commercial banks shall submit the following documents to the SAFE to apply for limit of foreign exchange purchase to conduct overseas wealth management business:
(1) a written application (including but not limited to the basic information of the applicant, the proposed limit of foreign exchange purchase for investment purposes, investment plan, and etc.);
(2) documents issued by the CBRC on approval of the wealth management business;
(3) draft custody agreement;
(4) the proposed format agreement of trust to be signed with the investor, which shall stipulate the rights, obligations, and the sharing of benefits and risks of both parties;
(5) other documents required by the SAFE.
The SAFE shall, within 20 business days from the date of receipt of the complete application documents, make a decision on approval or disapproval of the application, and notify the applicant in writing with a copy sent to the CBRC.
Article 15 Commercial banks may provide overseas wealth management products denominated in RMB to investors within the approved limit of foreign exchange purchase and collectively conduct the purchase procedure to raise foreign exchange funds.
Article 16 After repatriation of funds from overseas, commercial banks shall return investment funds and the yield to investors. In the case of RMB investment funds, commercial banks shall surrender foreign exchange to banks before making the payment; in the case of foreign exchange investment fund, commercial banks shall transfer the foreign exchange to investor’s original account, or an account designated by the investor in case the original one is closed.
Article 17 The actual volume of foreign exchange purchase by a commercial bank for wealth management purposes shall not exceed the limit of foreign exchange purchase approved by the SAFE.
Article 18 Commercial banks should take effective measures to hedge and manage exchange rate risks in overseas wealth management through forward foreign exchange surrender and other operations.
Chapter 4 Cross-border Fund Flow Management
Article 19 When conducting wealth management in the overseas market, a commercial bank shall entrust other domestic commercial bank(s) approved by the CBRS with a custody qualification to be the custodian of the total volume of overseas investment fund.
Article 20 In addition to the duties required by the CBRC, the custodian shall perform the following functions:
(1) Open domestic custody account, overseas foreign exchange settlement account and securities investment custody account in accordance with the overseas wealth management plan of a commercial bank;
(2) Monitor the investment operation of the commercial bank and promptly report to the SAFE any investment order that violates laws or regulations;
(3) Keep the records of fund outflow, repatriation, exchange, receipt of and payment with foreign exchange and other fund flows, for at least 15 years;
(4) Conduct balance of payment reporting according to relevant regulations;
(5) Help the SAFE monitor the use of fund by commercial banks overseas;
(6) Other functions as required by the SAFE in accordance with prudential supervision regulation.
Article 21 The custodian shall provide reports according to the following requirements:
(1) Report to the CBRC and SAFE within five business days from the date of opening domestic custody account, overseas foreign exchange settlement account and securities investment custody account;
(2) Report to the SAFE on transfer of fund within five business days from the date of commercial bank transferring investment fund abroad and repatriating the fund and its yield;
(3) Report to the SAFE on income of and expenditure of domestic custody account within 5 business days after the end of each month;
(4) Report to the SAFE on statement of commercial bank’s overseas use of foreign exchange fund in the year within one month after the end of every year;
(5) Report to the CBRC and SAFE promptly when discovering any investment in violation of laws and regulations;
(6) Other reports as required by the CBRC and SAFE.
Article 22 After receiving SAFE’s approval document on foreign exchange purchase limit, a commercial bank shall sign a custody agreement with its domestic custodian and open a domestic custody account supported by the SAFE approval. The commercial bank shall provide the formal custody agreement to the SAFE within 5 business days from the date of opening domestic custody account.
Article 23 The income of a domestic custody account includes foreign exchange fund transferred by the commercial bank, investment fund and yield repatriated by the commercial bank and other incomes stipulated by the SAFE.
Expenditure of a domestic custody account includes fund transferred to overseas foreign exchange settlement account, fund transferred to the commercial bank, exchange charges, custody charges, asset management charges, various kinds of commissions as well as other expenditures stipulated by the SAFE.
Article 24 A domestic custodian should, in accordance with the prudential principle, choose overseas financial institution(s) as its overseas agent(s) in light of risk management requirements and on commercial terms.
A domestic custodian should open foreign exchange settlement account and securities investment custody account for the commercial bank with the overseas agent, to be used for settlement with overseas securities custodian and clearing institutions and securities custody business.
Article 25 A domestic custodian and an overseas agent should establish separate accounts for different commercial banks.
Chapter 5 Information Disclosure and Supervision
Article 26 Commercial banks shall purchase overseas financial products according to relevant rules on risk management issued by the CBRC.
The CBRC will supervise risks associated with the overseas wealth management business conducted by commercial banks in line with related rules and regulations.
Article 27 Commercial banks that engage in the business of managing wealth on behalf of their clients in overseas market shall disclose to investors in a comprehensive and detailed manner the investment plan, features of the products and related risks at the time of selling investment products in order for investors to make independent decisions.
Article 28 Commercial banks that engage in the business of managing wealth on behalf of their clients in overseas market shall disclose to investors the position and performance of investment and the risk situation.
Article 29 Commercial banks that engage in the business of managing wealth on behalf of their clients in overseas market shall fulfill the obligation of submitting statistical report on their purchase and surrender of foreign exchange.
Article 30 The SAFE may adjust, in accordance with the need to maintain a balanced BOP account, the limit of foreign exchange purchase of commercial banks for the purpose of managing wealth on behalf of their clients in overseas market.
Article 31 The CBRC and the SAFE may request commercial banks, domestic custodian and overseas agent to provide information on commercial banks’ overseas investment activities and, when necessary, conduct on-site examination over the commercial banks in accordance with their supervisory responsibilities.
Article 32 Commercial banks shall report to the CBRC and the SAFE within five business days after the occurrence of each of the followings:
(1) Alteration of domestic custodian and overseas agent;
(2) Substantive changes in registered capital and shareholder structure;
(3) Involvement in law suits or imposition of severe punishment;
(4) Other situations stipulated by the CBRC and SAFE.
Article 33 The domestic custodian of a commercial bank shall report to the SAFE within five business days after the occurrence of one of the followings:
(1) Substantive changes in registered capital and shareholder structure;
(2) Involvement in law suits or imposition of severe punishment;
(3) Other situations stipulated by the SAFE.
Article 34 In the case of violation of these Rules by commercial banks and domestic custodian, the SAFE shall impose administrative penalty. In the case of serious violation, the CBRC and SAFE may request the commercial bank to change its domestic custodian or abrogate its limit of foreign exchange purchase for the purpose of managing wealth on behalf of clients in overseas market. In the case of overseas agent rejecting to provide relevant information, the CBRC and SAFE may request alteration of overseas agent.
Chapter 6 Supplementary Articles
Article 35 Commercial banks’ investment in financial products in the Hong Kong and Macao special administrative regions shall be regulated in accordance with the relevant articles in these Rules.
Article 36 These Rules shall be interpreted by the People’s Bank of China and the CBRC.
Article 37 These Rules shall be implemented on the day of its issuance.
