Circular of the China Banking Regulatory Commission Regarding the Release of the Guidelines for Syndicated Loans
Circular of the China Banking Regulatory Commission Regarding the Release of the Guidelines for Syndicated Loans
Circular of the China Banking Regulatory Commission Regarding the Release of the Guidelines for Syndicated Loans
Yin Jian Fa [2007] No. 68
August 11, 2007
To the various banking regulatory bureaus, policy banks, state-owned commercial banks, joint-stock commercial banks, postal savings banks, trust companies directly under the supervision of the China Banking Regulatory Commission, enterprise group financial companies, and lease finance companies:
The Guidelines for Syndicated Loans is hereby released to you, please implement accordingly.
The banking regulatory bureaus should forward this Circular to the urban commercial banks, rural commercial banks, rural cooperative banks, rural credit unions, urban credit unions, wholly owned foreign banks, Sino-foreign joint-venture banks, and the reporting banks of foreign bank branch offices within their jurisdiction.
Chapter I General Provisions
Article 1 With the goal of improving and normalizing the syndicated loan business, distributing credit risk, and promoting cooperation within the banking industry so that banks may provide better financing services to key enterprises and projects, these Guidelines are formulated on the basis of the Banking Supervision Law of the People's Republic of China, the Law of the People's Republic of China on Commercial Banks, the Contract Law of the People's Republic of China, the Security Law of the People's Republic of China, and other relevant laws and regulations.
Article 2 These Guidelines are applicable to banks and non-banking financial institutions (hereinafter simply banks) which are established in Chinese territory with the approval of the China Banking Regulatory Commission (hereinafter the CBRC) and which provide loan services.
Article 3 A "syndicated loan" refers to the offering of a loan or credit in foreign or local currency at a stipulated time and rate by two or more banks acting through a Correspondent Bank on the basis of a single loan agreement with identical terms.
Article 4 When a bank engages in syndicated loan business, it shall be in compliance all relevant national laws and regulations, shall be in line with national credit policy, and shall uphold principles of equality, mutual benefit, fair consultation, honest performance of relevant obligations, and full acceptance of relevant risks.
Article 5 As an organization of industry self-regulation, industry associations shall take charge of promoting self-regulation within the syndicated loan market, coordinating syndicated loans and the problems that arise during relevant transactions, collecting and disclosing information relevant to syndicated loans, and drafting industry standards.
Chapter II Syndicate Members
Article 6 All banks which participate in the offering of syndicated loans are Syndicate Members. Each Syndicate Member should determine its individual credit contribution according to principles of "information sharing, independent verification, autonomous decision-making, and individual acceptance of risk," and should have rights and duties stemming from the syndicate loan commensurate with the share of said contribution.
Article 7 Syndicate Members are generally classified, on the basis of their functions and responsibilities, into Lead Banks, Correspondent Banks, and Participating Banks. Other syndicate roles such as Secondary Lead Banks may be created as needed or required by the scale of relevant activities, with duties carried out pursuant to the relevant syndicated loan agreements.
Article 8 The Lead Bank of a syndicate refers to the bank which, with the approval of the Borrower, creates and organizes the syndicate and which is responsible for distributing shares in the loan; the Lead Bank is the organizer and arranger of the syndicated loan.
Article 9 The main functions of a Lead Bank include:
1. Initiating and organizing the syndicated loan, distributing shares in the loan;
2. Carrying out a full pre-loan investigation of the Borrower, drafting an informational memorandum for the syndicated loan, and sending out proposals to potential participating Banks;
3. Representing the syndicate in meeting with the Borrower to discuss the terms of the loan;
4. Representing the syndicate in engaging an intermediary organization to draft legal texts relevant to the syndicated loan.
5. Arranging for the signing of a written loan agreement between the Borrower and the Syndicate Members;
6. Assisting the Correspondent Bank with management of the syndicated loan; and
7. Other functions stipulated in the syndicate agreement;
Article 10 When a single bank undertakes the role of Lead Bank, their share in the loan shall, in principle, be no less than 20% of the total amount financed by the syndicate; the shares distributed to other Syndicate Members shall, in principle, be no less than 50%.
Article 11 Depending on the liabilities on the loan stemming from the shares allocated to the Lead Bank, the distribution of the loan by the Lead Bank may be classified as a full underwriting, a partial underwriting, or an aggressive distribution.
Article 12 The Correspondent Bank refers to the bank that pools relevant funds and provides the loan to the Borrower according to the amounts and schedule specified in the terms of the loan and which is entrusted by the syndicate to manage syndicate funds in accordance with the functions stipulated in the syndicate loan agreement.
The head bank may assume the role of Correspondent Bank, or the Correspondent Bank may be decided by agreement of the Syndicate Members.
Article 13 The main functions of a Correspondent Bank include:
1.
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