Regulations on Deposit Insurance

Order of the State Council of the People's Republic of China No.660

February 17, 2015

The Regulations on Deposit Insurance adopted at the 67th executive meeting of the State Council on October 29, 2014 are hereby promulgated and shall come into force as of May 1, 2015.

Li Keqiang, Premier

Regulations on Deposit Insurance

Article 1 The Regulations on Deposit Insurance (hereinafter referred to as the "Regulations") are formulated with a view to establishing and regulating the deposit insurance system, protecting the legitimate rights and interests of depositors according to the law, promptly preventing and defusing financial risks, and maintaining the financial stability.

Article 2 Commercial banks, rural cooperative banks, rural credit cooperatives and other banking financial institutions absorbing deposits established within the territory of the People's Republic of China (hereinafter collectively referred to as the "Insured Institutions") shall purchase the deposit insurance in accordance with the provisions of the Regulations.
The provisions of the preceding paragraph shall not apply to the branches established by the Insured Institutions outside the territory of the People's Republic of China and the branches established by foreign banks within the territory of the People's Republic of China, unless there are other arrangements between the People's Republic of China and other countries or regions in terms of the deposit insurance system.

Article 3 For the purpose of the Regulations, the deposit insurance shall refer to the system whereby the Insured Institutions pay insurance premiums to the deposit insurance fund management institution to form deposit insurance funds, and the deposit insurance fund management institution, in accordance with the provisions of the Regulations, pays back the insured deposits to depositors and takes necessary measures to maintain the safety of both the deposits and the deposit insurance funds.

Article 4 Insured deposits shall include the RMB deposits and foreign currency deposits absorbed by the Insured Institutions, excluding interbank deposits of financial institutions, the deposits placed with the Insured Institutions by their respective senior officers and other deposits that shall not be insured as prescribed by the deposit insurance fund management institution.

Article 5 The deposit insurance is subject to the reimbursement under a certain limit, with the maximum reimbursement limit set at CNY500,000. The People's Bank of China (hereinafter referred to as the "PBC") may, in conjunction with relevant departments of the State Council, adjust the maximum reimbursement limit according to economic development, changes in the structure of deposits, situation of financial risks and other factors, and announce and implement the adjusted limit after reporting the same to the State Council for approval.
Where the total amount of the principal and interest of the deposits in all the insured deposit accounts opened by the same depositor in the same Insured Institution calculated on a consolidated basis is within the maximum reimbursement limit, such total amount will be reimbursed in full amount; and, any portion in excess of the maximum reimbursement limit shall be paid with the liquidation property of the Insured Institution according to the law.
After reimbursing the insured deposits of the depositor, the deposit insurance fund management institution shall, within the amount reimbursed, obtain the creditor's rights of the same order held by the depositor against the Insured Institution.
The measures for reimbursing deposits of social insurance funds and housing provident funds shall be separately formulated by the PBC in conjunction with relevant departments of the State Council, and be reported to the State Council for approval.

Article 6 The sources of deposit insurance funds shall include:
1. insurance premiums paid by the Insured Institutions;
2. the property distributed during the liquidation of the Insured Institutions;
3. proceeds obtained by the deposit insurance fund management institution from utilizing the deposit insurance funds; and
4. other legitimate incomes.

Article 7 The deposit insurance fund management institution shall perform the following duties:
1. formulating and promulgating rules relevant to the performance of its duties;
2. setting up and adjusting the standards for deposit insurance premium rate, and reporting the same to the State Council for approval;
3. determining the premium rates applicable to the Insured Institutions;
4. collecting insurance premiums;
5. managing and utilizing deposit insurance funds;
6. taking early corrective measures and risk disposal measures pursuant to the provisions of the Regulations;
7. promptly reimbursing the insured deposits of depositors within the limit prescribed herein; and
8. other duties approved by the State Council.
The deposit insurance fund management institution shall be determined by the State Council.

Article 8 Banking financial institutions absorbing deposits that have opened prior to the implementation of the Regulations shall go through insurance purchase procedures within the time limit prescribed by the deposit insurance fund management institution.
Banking financial institutions absorbing deposits that open after the implementation of the Regulations shall, within six months as of the date of issuance of business licenses by the administrations for industry and commerce, go through insurance purchase procedures as required by the deposit insurance fund management institution.

Article 9 The deposit insurance premium rate shall consist of benchmark premium rate and risk-adjusted premium rate. The standards for premium rate shall be formulated and adjusted by the deposit insurance fund management institution based on the state of financial development, the structure of deposits, the cumulative amount of the deposit insurance funds and other factors, and shall be implemented after being reported to the State Council for approval.
The premium rates applicable to the Insured Institutions shall be determined by the deposit insurance fund management institution according to the operating and management conditions, risk profile and other factors of the Insured Institutions.

Article 10 The insurance premiums payable by an Insured Institution shall be calculated according to the amount of insured deposits of the Insured Institution and the applicable premium rate determined by the deposit insurance fund management institution. Specific measures in this regard shall be prescribed by the deposit insurance fund management institution.
An Insured Institution shall, as required by the deposit insurance fund management institution, submit, on a regular basis, the balance of its insured deposits, deposit structure and other necessary information related to the determination of the applicable premium rate, the accounting of insurance premiums, and the reimbursement of deposits.
An Insured Institution shall pay insurance premiums once every six months pursuant to the provisions of the deposit insurance fund management institution.

Article 11 Deposit insurance funds shall be utilized by following the principles of safety, liquidity, and preservation and appreciation of values and only in the following forms:
1. depositing deposit insurance funds in the PBC;
2. investing deposit insurance funds in government bonds, central bank bills, financial bonds with higher credit ratings and other senior bonds; and
3. other fund application forms approved by the State Council.

Article 12 The deposit insurance fund management institution shall, within three months as of the ending date of each fiscal year, prepare the financial and accounting reports and statements on the receipts and expenses related to deposit insurance funds, prepare annual reports, and disclose the same in accordance with relevant provisions of the State.
The receipts and expenses related to the deposit insurance funds shall be in compliance with the unified national financial and accounting system, and be subject to the audit and supervision of audit bodies according to the law.

Article 13 The deposit insurance fund management institution may conduct the verification if it finds any of the following circumstances during the performance of duties:
1. where the premium rate applicable to an Insured Institution may need to be adjusted due to changes in its risk status, the deposit insurance fund management institution may verify relevant circumstances involving premium rate calculation;
2. where there may be any problem in the base number for the payment of insurance premiums by an Insured Institution, the deposit insurance fund management institution may verify the size, structure and authenticity of the deposits of the Insured Institution; or
3. the deposit insurance fund management institution may verify the authenticity of the information and materials submitted by an Insured Institution.
Major issues found during the verification shall be communicated to the relevant banking regulatory authority.

Article 14 The deposit insurance fund management institution shall participate in the financial supervision, management and coordination mechanism, and establish an information sharing mechanism with the PBC, the relevant banking regulatory authority and other financial management departments and institutions.
The deposit insurance fund management institution shall obtain, via the information sharing mechanism, the risk profiles, inspection reports, ratings and other supervision and management information of relevant Insured Institutions.
Where the information prescribed in the preceding paragraph is unable to meet the needs such as the control on the risks of deposit insurance funds, guarantee of timely reimbursement, determination of differential premium rates and so on, the deposit insurance fund management institution may require Insured Institutions to promptly submit other relevant information.

Article 15 The deposit insurance fund management institution may issue a risk warning to an Insured Institution if it finds that the Insured Institution falls under any circumstance affecting the safety of deposits and deposit insurance funds such as undercapitalization.

Article 16 Where an Insured Institution suffers a significant drop in its capital adequacy ratio due to major losses of assets or other reasons, and such situation seriously endangers the safety of deposits and deposit insurance funds, the Insured Institution shall, in accordance with the requirements of the deposit insurance fund management institution, the PBC and the relevant banking regulatory authority, timely take measures such as replenishing the capital, controlling asset growth, controlling credit extension of major transactions, lowering the leverage ratio and so on.
Where an Insured Institution falls under the circumstances prescribed in the preceding paragraph and fails to make improvements within the time limit prescribed by the deposit insurance fund management institution, the deposit insurance fund management institution may raise the premium rate applicable to the Insured Institution.

Article 17 The deposit insurance fund management institution may suggest the relevant banking regulatory authority to take appropriate measures in accordance with the law if it finds that an Insured Institution falls under the circumstances prescribed in Article 38 and Article 39 of the Banking Regulation Law of the People's Republic of China.

Article 18 The deposit insurance fund management institution may choose to use deposit insurance funds in any of the following ways to protect the interests of depositors:
1. directly reimburse the insured deposits within the limit prescribed herein;
2. entrust other qualified Insured Institutions to reimburse the insured deposits on its behalf within the limit prescribed herein; or
3. provide other qualified Insured Institutions with guarantee, loss apportionment or financial support, so as to facilitate their acquisition or assumption of all or part of the business, assets and liabilities of Insured Institutions to be taken over, cancelled or under the application for bankruptcy.
Where the deposit insurance fund management institution chooses any of the methods prescribed in the preceding paragraph in formulating the use scheme for deposit insurance funds, it shall follow the principle of minimum use-cost of the funds.

Article 19 Under any of the following circumstances, a depositor shall be entitled to require the deposit insurance fund management institution to use deposit insurance funds to reimburse the insured deposits of the depositor within the limit prescribed herein:
1. where the deposit insurance fund management institution serves as the organization that takes over an Insured Institution;
2. where the deposit insurance fund management institution conducts the liquidation of a canceled Insured Institution;
3. where a people's court rules to accept the bankruptcy application of an Insured Institution; or
4. other circumstances approved by the State Council.
The deposit insurance fund management institution shall reimburse deposits in full amount in accordance with the provisions of the Regulations within seven working days as of the occurrence date of the circumstance stipulated in the preceding paragraph.

Article 20 Staff members of the deposit insurance fund management institution shall be given sanctions according to the law if they fall under any of the following circumstances:
1. where they collect insurance premiums in violation of relevant provisions;
2. where they use or utilize deposit insurance funds in violation of relevant provisions; or
3. where they violate relevant provisions and fail to promptly reimburse deposits in full amount.
Staff members of the deposit insurance fund management institution shall be given sanctions according to the law if they commit the acts of abusing powers, neglecting duties, or divulgating state secrets or commercial secrets coming to their knowledge, and shall be investigated for criminal liabilities according to the law if such acts have constituted criminal offences.

Article 21 An Insured Institution that falls under any of the following circumstances shall be ordered by the deposit insurance fund management institution to make correction within the prescribed time limit; where the Insured Institution fails to make correction by the prescribed deadline, or if the circumstances are grave, the deposit insurance fund management institution shall record relevant situations and use the same as the bases for adjusting the premium rate applicable to the Insured Institution:
1. where the Insured Institution fails to purchase the insurance according to the law;
2. where the Insured Institution fails to promptly make full payment of insurance premiums in accordance with the law;
3. where the Insured Institution fails to submit the information or materials as required, or submits false information or materials;
4. where the Insured Institution refuses to accept, or obstructs, the verification conducted by the deposit insurance fund management institution in accordance with the law; or
5. where the Insured Institution impedes the implementation of the use scheme for deposit insurance funds by the deposit insurance fund management institution.
Where an Insured Institution falls under any of the circumstances prescribed in the preceding paragraph, the deposit insurance fund management institution may make public the persons in charge of the Insured Institution and its personnel directly liable. Where the Insured Institution falls under the circumstance prescribed in Item 2 of the preceding paragraph, the deposit insurance fund management institution may also collect an overdue fine from the Insured Institution at the rate of 0.05% of the outstanding insurance premiums per day additionally.

Article 22 The Regulations shall not apply to banking financial institutions absorbing deposits that have been taken over or revoked according to the decision of the banking regulatory authority of the State Council according to the law or whose applications for bankruptcy have been accepted by the people's courts before the implementation of the Regulations.

Article 23 The Regulations shall come into force as of May 1, 2015.