| Circular of the People's Bank of China on Matters concerning Opening RMB and Foreign Currency Swap Business in the Inter-bank Market |
| Friday,August 17,2007 Posted: 13:56 BJT(0556 GMT) |
| From:FDI Article type:Reproduced |
Yin Fa [2007] No.287 Shanghai Headquarters, each branch, each business management department and each central sub-branch in the provincial capital city and sub-provincial city; foreign exchange bureau and department of the State Administration of Foreign Exchange of each province, autonomous region and municipality directly under the Central Government and foreign exchange bureau in Shenzhen, Dalian, Qingdao, Ningbo and Xiamen; each policy bank, state-owned commercial bank, joint-stock commercial bank; and China Foreign Exchange Trading Center: The related matters concerning opening RMB and foreign exchange currency swap business by domestic institutions in the inter-bank foreign exchange market are hereby notified as follows: 1. The term "RMB and foreign exchange currency swap" means a trading agreement on exchanging between a stipulated amount of RMB principal and a stipulated amount of foreign currency principal within the prescribed period of time and exchanging the interests on the two currencies on a regular basis. Principals may be exchanged in the following modes: (1) both parties shall, when the agreement becomes effective, do the exchange at a stipulated exchange rate on the date, and when the agreement becomes expired, make a reverse exchange at the same exchange rate and the same amounts of principals on the date; (2) other modes as specified by the People's Bank of China (hereinafter referred to as "PBC") and the State Administration of Foreign Exchange (hereinafter referred to as "SAFE"). Interest exchange refers to that each party shall pay the other party interest computed in light of the amount of target currency. Interest may be computed at a fixed interest rate or a floating interest rate. 2. Currently, it is allowed to control currency swap transactions between RMB and USD, RMB and Euro Dollar, RMB and Yen, RMB and Hong Kong Dollar, RMB and Pound in the inter-bank foreign exchange market. 3. Domestic institutions having the membership of the inter-bank forward exchange market may control RMB and foreign exchange currency swap business in the inter-bank foreign exchange market. 4.. The SAFE shall be responsible for archive-filing management to RMB and foreign exchange currency swap business. domestic institution satisfying the requirement prescribed in Article 3 of the present Circular shall submit the related materials via China Foreign Exchange Trading Center to the SAFE for archival filing before conducting RMB and foreign exchange currency swap business. Such materials shall include: an application for opening RMB and foreign exchange currency swap business and its internal risk control system for conducting RMB and foreign exchange currency swap business. The materials shall be firstly filed with China Foreign Exchange Trading Center for examination and then submitted to the SAFE. Within 20 workdays since the date when it receives the materials submitted by China Foreign Exchange Trading Center, the SAFE shall send an archive-filing notice to the applicant in light of the requirements prescribed in the present Circular and send copies to the PBC and China Foreign Exchange Trading Center. 5. The following provisions shall be observed in conducting RMB and foreign exchange currency swap business: (1) the reference interest rate of RMB applied in currency swap shall be a benchmark money market interest rate published by the National Inter-bank Funding Center on the base of the authorization of the PBC or the benchmark deposit/loan interest rate published by the PBC, and at the same time, the reference interest rate of the foreign currency shall be determined by both parties of the transaction upon negotiations; (2) domestic institutions shall abide by the provisions on synthetic position in foreign exchange settlement and sale and other provisions on foreign exchange control; (3) domestic institutions shall engage in RMB and foreign exchange currency swap business through the trading system of China Foreign Exchange Trading Center; (4) in order to clearly define the rights and obligations of both parties, both parties to a RMB and foreign exchange currency swap transaction shall enter into a master agreement. A master agreement and a transaction record (including the transaction slip printed from the trading system of China Foreign Exchange Trading Center) constitute a written trading contract. Both parties may conclude a supplementary agreement when necessary to clarify the rights and obligations of both parties, default circumstances and default liabilities, which shall also be deemed as part of the trading contract. (5) both parties shall strictly fulfill the contractual obligations and make account settlement according to the contents of the contract, after a currency swap contract is concluded; and (6) where any default occurs in a currency swap transaction, if there is any dispute over the fact or liability of the default, either party of the transaction may apply for arbitration or initiate a lawsuit to the people's court, and, before 12:00 of the workday next to the date when the final result of the arbitration or the lawsuit is received, serve the result on the base of China Foreign Exchange Trading Center, which shall publish it on the same day. 6. China Foreign Exchange Trading Center shall be responsible for providing RMB and foreign exchange currency swap trading system and formulate RMB and foreign exchange currency swap trading rules according to the present Circular, which shall be carried out after they are submitted to the PBC and the SAFE for archival filing. 7. China Foreign Exchange Trading Center shall be responsible for the daily statistical and monitoring work of RMB and foreign exchange currency swap transactions, submit the statistical data and other information to the PBC and the SAFE in written form within the first 10 workdays of the next month, and disclose the related information in the market in time. But it may not leak out any information which is not supposed to be publicized or mislead market players. In the event of any unusual circumstance, it shall report it to the PBC and the SAFE in time. 8. The PBC and the SAFE shall exercise supervision and control over the RMB and foreign exchange currency swap business in the inter-bank foreign exchange market. The PBC and the SAFE will impose corresponding punishments upon institutions conducting RMB and foreign exchange currency swap business by violating the provisions of the present Circular or disrupting normal market order in accordance with the Law of the People's Republic of China on the People's Bank of China, the Regulations of the People's Republic of China on Foreign Exchange Control and other related laws and regulations. 9. Branches and sub-branches of the PBC shall forward the present Circular to all urban commercial banks, rural commercial banks, rural cooperative banks and foreign-funded banks within your respective jurisdictions. 10. The present circular shall enter into force as of the promulgation date. People's Bank of China
August 17, 2007 |
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