Interim Administrative Measures for the Derivative Product Transactions of Financial Institutions
Interim Administrative Measures for the Derivative Product Transactions of Financial Institutions
Interim Administrative Measures for the Derivative Product Transactions of Financial Institutions
Order of the China Banking Regulatory Commission [2004] No. 1
February 4, 2004
These Interim Administrative Measures for the Derivative Product Transactions of Financial Institutions have been adopted at the chairmen's meeting of the China Banking Regulatory Commission. They are hereby promulgated and shall go into effect as of March 1, 2004.
Chairman: Liu Mingkang
Attached: Interim Administrative Measures for the Derivative Product Transactions of Financial Institutions
Chapter I General Provisions
Article 1 With the goal of normalizing the administration of the derivative product transactions of financial institutions and effectively controlling the risks of financial institutions that conduct derivative product transactions, these Procedures are formulated in accordance with the Banking Regulatory Law of the People's Republic of China, the Law of the People's Republic of China on Commercial Banks and other relevant laws and administrative regulations.
Article 2 For the purposes of these Procedures, "financial institutions" refer to certain legal persons such as banks, trust investment companies, financial companies, lease finance companies, and automotive financing companies that are established within the territory of the People's Republic of China, as well as the branch offices of foreign banks established within China (hereinafter referred to as foreign banks).
Article 3 For the purposes of these Procedures, "derivative products" refer to a kind of financial agreement whose value depends on one or many underlying assets or indicators. The basic types of such agreements include forwards, futures, swaps and options. Derivative products also include structured financial instruments which exhibit one or more of the features of the aforementioned basic types.
Article 4 The derivative product transactions of financial institutions referred to in these Procedures may be classified into two categories:
1. The derivative product transactions carried out by financial institutions in order to manage their own asset or debt risk, or earn profits. When financial institutions conduct these sorts of transactions, they are considered as the end users of relevant derivative products.
2. The derivative product services provided by financial institutions to their clients (including other financial institutions). The financial institutions that conduct these sorts of transactions are considered to be derivative product brokers. Those brokers which can provide derivative product quotations and transaction services to clients as well as other brokers are considered to be derivative product market makers.
Article 5 The China Banking Regulatory Commission (hereinafter referred to as CBRC) is the institution authorized to supervise and regulate the financial institutions that conduct derivative product transactions. Financial institutions which intend to conduct derivative product transactions shall be subject to the examination and approval of the CBRC and accept their supervision and inspection.
Non-financial institutions shall not provide derivative product services to clients.
Article 6 Financial institutions which conduct derivative product transactions related to foreign exchange, stocks, and commodities or other transactions on an exchange shall abide by the national regulations governing the administration of foreign exchange and other relevant regulations.
Chapter II Administration of Market Entry
Article 7 A financial institution applying to conduct derivative product transactions shall meet the following requirements:
1. Having well-established risk management and internal control systems for derivative product transactions;
2. Having a well-established derivative product transaction management system with automated linking of transaction stages and a perfected real-time risk management system;
3. Having a person in charge of derivative product transactions who has a minimum of 5 years experience directly participating in derivative product transactions and risk management with no incidents on record;
4.
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