China's Regulation on the Supervision and Administration of Financing Guarantee Companies 

· Document Number：Order No. 683 of the State Council

· Area of Law： Securities

· Level of Authority： Administrative Regulations

· Date issued：08-02-2017

· Effective Date：10-01-2017

· Status： Effective

· Issuing Authority： State Council

Order of the State Council
(No. 683)
The Regulation on the Supervision and Administration of Financing Guarantee Companies, as adopted at the 177th executive meeting of the State Council on June 21, 2017, is hereby issued and shall come into force on October 1, 2017.
Premier: Li Keqiang
August 2, 2017
Regulation on the Supervision and Administration of Financing Guarantee Companies
Chapter I General Provisions
Article 1 This Regulation is developed for the purposes of supporting the development of inclusive finance, promoting fund accommodation, regulating the conduct of financing guarantee enterprises, and preventing risks.
Article 2 For the purposes of this Regulation, “financing guarantee” means that the guarantor provides security for the secured party's debt financing such as borrowings and issuance of bonds. “Financing guarantee companies” means limited liability companies or joint stock companies that are formed in accordance with the law to conduct the financing guarantee business.
Article 3 Financing guarantee companies shall conduct businesses in accordance with laws and regulations, conduct prudential operation, have good faith, and shall not damage national interest, public interest or the lawful rights and interests of any other person.
Article 4 The department determined by the people's government of the province, autonomous region or municipality directly under the Central Government (hereinafter referred to as the “regulatory department”) shall be responsible for the supervision and administration of financing guarantee companies of its region.
The people's government of the province, autonomous region or municipality directly under the Central Government shall be responsible for developing policies and measures that promote the development of the financing guarantee industry in its region, handle the risks of financing guarantee companies, and urge regulatory departments to strictly perform functions.
The State Council shall establish the inter-ministerial joint meeting for the supervision of the financing guarantee business, be responsible for drafting rules for the supervision and administration of financing guarantee companies, coordinate the resolution of major issues in the supervision and administration of financing guarantee companies, and urge and direct local people's governments to conduct the supervision and administration of financing guarantee companies and dispose of risks. The inter-ministerial joint meeting for the supervision of the financing guarantee business shall be led by the banking regulatory authority of the State Council and participated by relevant departments of the State Council.
Article 5 The state shall promote the establishment of the government financing guarantee system, develop financing guarantee companies supported by the government, establish the mechanism for the cooperation of governments, banking financial institutions and financing guarantee companies, enlarge the scale of financing guarantee business for micro and small enterprises, agriculture, rural areas and farmers, and maintain relatively low fee rates.
Public finance departments of people's governments at all levels shall, by such methods as making capital investment and establishing the risk assumption mechanism, provide fiscal support for financing guarantee companies that mainly serve micro and small enterprises, agriculture, rural areas and farmers, and the specific measures shall be formulated by the public finance department of the State Council.
Chapter II Formation, Modification and Termination
Article 6 The formation of a financing guarantee company shall be subject to the approval of the regulatory department.
The name of the financing guarantee company shall indicate the words financing guarantee.
Without the approval of the regulatory department, no entity or individual may conduct the financing guarantee business, and no entity may use the words financing guarantee in the name, unless it is otherwise provided for by the state.
Article 7 The formation of a financing guarantee company shall comply with the provisions of the Company Law of the People's Republic of China, and meet the following conditions:
(1) Shareholders have good reputation and have no serious violation of law or regulation in the past three years.
(2) The company's registered capital is not less than 20 million yuan and is paid-in monetary capital.
(3) The to-be-appointed directors, supervisors and senior executives have a command of the laws and regulations relating to the financing guarantee business, and have the practicing experience and management capability required for the performance of functions.
(4) The company has sound business rules and internal management rules for risk control, among others.
The province, autonomous region or municipality directly under the Central Government may, in accordance with the economic development of its region and the actual development of the financing guarantee industry, increase the minimum limit of registered capital prescribed in the preceding paragraph.
Article 8 The applicant that applies for the formation of a financing guarantee company shall submit an application and materials proving that it meets the conditions prescribed in Article 7 of this Regulation to the regulatory department.
The regulatory department shall make a decision to approve or disapprove the application within 30 days as of the date of acceptance of the application. If it decides to grant approval, it shall issue the financing guarantee business permit. If it disapproves the application, it shall notify the applicant in writing and explain the reason for disapproval.
The financing guarantee company formed with approval shall be announced by the regulatory department.
Article 9 The business combination, division or reduction of registered capital of a financing guarantee company shall be subject to the approval of the regulatory department.
Where a financing guarantee company forms a branch office within the province, autonomous region or municipality directly under the Central Government at the place where it is located, changes its name, changes any shareholder holding 5% or more equities or changes any director, supervisor or senior executive, it shall, within 30 days as of the date of formation of the branch office or the modification of relevant matters, report it to the regulatory department for recordation. The relevant matters after modification shall comply with the provisions of paragraph 2 of Article 6 and Article 7 of this Regulation.
Article 10 Where a financing guarantee company forms a branch office across provinces, autonomous regions, and municipalities directly under the Central Government, it shall meet the following conditions and obtain the approval of the regulatory department at the place where the to-be-formed branch office is located.
(1) Its registered capital is not less than one billion yuan.
(2) It has conducted the financing guarantee business for three years or more, and has earned profits in the latest two consecutive accounting years.
(3) It has no record of any serious violation of law or regulation in the last two years.
The provision of Article 8 of this Regulation shall apply to the procedures and time limit for granting approval by the regulatory department at the place where the to-be-formed branch office is located.
The financing guarantee company shall, within 30 days as of the date of formation of the branch office, report the relevant information to the regulatory department at the place where the company is located.
The routine supervision and administration of a branch office formed by a financing guarantee company across provinces, autonomous regions, and municipalities directly under the Central Government shall be under the charge of the regulatory department at the place where the branch office is located, and the regulatory department at the place where the financing guarantee company is located shall cooperate.
Article 11 Where a financing guarantee company is dissolved, it shall form a liquidation group in accordance with the law to conduct liquidation, and make specific arrangements on the assumption of undue financing guarantee responsibility. The liquidation process shall be subject to the supervision of the regulatory department.
Where a financing guarantee company is dissolved or declared bankrupt in accordance with the law, the financing guarantee business permit shall be turned to the regulatory department for cancellation, and be announced by the regulatory department.
Chapter III Business Rules
Article 12 In addition to the operation of loan guarantee, guarantee of issued bonds and other financing guarantee businesses, a financing guarantee company that has stable business operation and sound financial conditions may also conduct non-financing guarantee businesses such as bidding guarantee, guarantee for the performance of contracts on projects, and guarantee for preservative measure in litigation and services such as consulting relating to the guarantee business.
Article 13 A financing guarantee company shall, under the principle of prudential business operations, establish and improve business rules in such aspects as the review of financing guarantee projects, post-guarantee management, and recovery of compensation liability, and internal control rules on risk management, among others.
The financing guarantee company supported by the government shall enhance the capability to use big data and other modern information technology means to serve the financing demand of micro and small enterprises, agriculture, rural areas and farmers.
Article 14 The financing guarantee company shall, according to the risk weight prescribed by the state, measure the balance of guarantee liability.
Article 15 The balance of guarantee liability of the financing guarantee company shall not exceed ten times its net assets.
For a financing guarantee company that mainly serves micro and small enterprises, agriculture, rural areas and farmers, the upper limit of the multiplier prescribed in the preceding paragraph may be raised to 15 times.
Article 16 The ratio of balance of the financing guarantee company's guarantee liability against the same secured party to the net assets of the financing guarantee company shall not exceed 10%, and the ratio of balance of the financing guarantee company's guarantee liability against the same secured party and its affiliated parties to the net assets of the financing guarantee company shall not exceed 15%.
Article 17 A financing guarantee company shall not provide financing guarantee to any of its controlling shareholders and actual controllers, and the conditions for the provision of financing guarantee to other affiliated parties shall not be better than the conditions for the provision of the same type of guarantee to non-affiliated parties.
Where a financing guarantee company provides financing guarantee to any affiliated party, it shall report it to the regulatory department within 30 days as of the date of provision of guarantee, and disclose it in the notes to accounting statements.
Article 18 The financing guarantee company shall withdraw the corresponding reserve fund in accordance with the relevant provisions of the state.
Article 19 The financing guarantee fee rates shall be determined by the financing guarantee company and the secured party through consultation.
Financing guarantee companies included in the mechanism for the assumption of financing guarantee risks of which the establishment is promoted by the government shall, in accordance with the relevant provisions of the state, reduce the fee rates of financing guarantee provided to micro and small enterprises, agriculture, rural areas and farmers in accordance with the relevant provisions of the state.
Article 20 Where the secured party or the third party provides counter-guarantee to the financing guarantee company in the form of hypothecation or pledge, and registration shall be handled in accordance with the law, the relevant registration authority shall handle registration in accordance with the law.
Article 21 The financing guarantee company has the right to require the secured party to provide the information on business activities and financial conditions relating to financing guarantee, among others.
The financing guarantee company shall provide the creditor of the secured party with the information on business activities and financial conditions relating to financing guarantee.
Article 22 The use of self-owned funds of financing guarantee companies shall comply with the provisions of the state on the safety and liquidity of assets of financing guarantee companies.
Article 23 A financing guarantee company shall not commit the following activities:
(1) Absorbing deposits or doing so in any disguised form.
(2) Operating loans by itself or upon entrustment.
(3) Making investment upon entrustment.
Chapter IV Supervision and Administration
Article 24 The regulatory department shall establish and improve work rules for supervision and administration, apply big data and other modern information technology means to monitor risks on real time, strengthen the off-site supervision and on-site inspection of financing guarantee companies, and establish the coordination mechanism for supervision and administration and information sharing mechanism with relevant departments.
Article 25 The regulatory department shall, in accordance with the business scale, major service recipients, internal management level, and risk status, among others, of financing guarantee companies, conduct the categorized supervision and administration of financing guarantee companies.
Article 26 The regulatory department shall, in accordance with the requirements of the relevant financing guarantee statistical rules of the state, submit the statistical data on financing guarantee companies in its region to the people's government at the same level and the banking regulatory authority of the State Council.
Article 27 The regulatory department shall analyze and assess the development of the financing guarantee industry in its region and the supervision and administration thereof, report it to the people's government at the same level and the banking regulatory authority of the State Council on an annual basis, and release to the public.
Article 28 The regulatory department may take the following measures to conduct on-site inspection:
(1) Entering the financing guarantee company to conduct inspection.
(2) Consulting employees of the financing guarantee company, and requiring them to make an explanation on the relevant inspection matters.
(3) Inspecting the computer information management system of the financing guarantee company.
(4) Consulting and duplicating the documents and materials relating to the inspection matters, and sealing the documents, materials and electronic equipment that may be transferred, concealed or damaged.
On-site inspection shall be conducted with the approval of the person in charge of the regulatory department. There shall be not less than two persons who shall show their legal certificates and inspection notice.
Article 29 The regulatory department may, as required for the performance of functions, hold regulatory talks with the directors, supervisors and senior executives of the financing guarantee company, and require them to make an explanation on the major matters concerning the business activities and risk management of the financing guarantee company.
The regulatory department may notify the creditor of the secured party the violation of law or regulation or risks of the financing guarantee company.
Article 30 Where the regulatory department finds that the business operation of the financing guarantee company may have major risks, with the approval of the principal person in charge of the regulatory department, the following measures may be taken in light of the following circumstances:
(1) Ordering it to suspend partial business.
(2) Restricting the size and method of using self-owned funds.
(3) Ordering it to suspend the formation of new branch offices.
The financing guarantee company shall take measures in a timely manner to eliminate major potential risks, and report the relevant information to the regulatory department. If it is confirmed that the major potential risk has been eliminated upon the acceptance check of the regulatory department, the regulatory department shall remove the measure prescribed in the preceding paragraph within three days as of the date of completion of acceptance check.
Article 31 The financing guarantee company shall, as required, submit the business operation report, financial report, the annual audit report issued by the certified public accountant and other documents and materials to the regulatory department.
Where a financing guarantee company conducts businesses across provinces, autonomous regions, and municipalities directly under the Central Government, it shall, on a quarterly basis, report the information on business implementation to the regulatory department at the place where it is located and the regulatory department at the place where the business is conducted.
Article 32 The financing guarantee company shall cooperate in the supervision and inspection conducted by the regulatory department in accordance with the law, and shall not refuse to accept or obstruct the supervision and inspection.
Article 33 The regulatory department shall establish and improve the rules for the credit records of financing guarantee companies. The credit records of financing guarantee companies shall be included in the national credit information sharing platform.
Article 34 The regulatory department shall, together with the relevant departments, establish the mechanism for the early warning, prevention and handling of major risk events of financing guarantee companies, and make the emergency response plan for serious risk incidents of financing guarantee companies.
Where a financing guarantee company has any major risk incident, it shall immediately take emergency response measures and report them to the regulatory department in a timely manner. The regulatory department shall handle the risk incident in a timely manner, and report it to the people's government at the same level, the banking regulatory authority of the State Council and the People's Bank of China.
Article 35 The regulatory department and its staff members shall keep confidential the trade secrets to which they have access in supervision and administration.
Chapter V Legal Liability
Article 36 Where anyone, in violation of this Regulation, forms a financing guarantee company without approval or conducts the financing guarantee business without approval, the regulatory department shall ban it or order it to cease business operation, impose a fine of not less than 500,000 yuan but not more than one million yuan on it, and if there is any illegal income therefrom, the illegal income shall be confiscated. If any crime is constituted, the violator shall be subject to criminal liability in accordance with the law.
Where anyone, in violation of this Regulation, uses the words financing guarantee in its name without approval, the regulatory department shall order it to take corrective action within a prescribed time limit; and if it fails to do so, shall impose a fine of not less than 50,000 yuan but not more than 100,000 yuan on it; and if there is any illegal income therefrom, the illegal income shall be confiscated.
Article 37 Where a financing guarantee company falls under any of the following circumstances, the regulatory department shall order it to take corrective action within a prescribed time limit, and impose a fine of not less than 100,000 yuan but not more than 500,000 yuan on it; if there is any illegal income therefrom, the illegal income shall be confiscated. If the company fails to take corrective action within the prescribed time limit, it shall be ordered to cease business operation for rectification, and if the circumstances are serious, its financing guarantee business permit shall be revoked.
(1) Business combination or division without approval.
(2) Reduction of registered capital without approval.
(3) Formation of a branch office across provinces, autonomous regions, and municipalities directly under the Central Government without approval.
Article 38 Where a financing guarantee company fails to undergo recordation formalities for the modification of relevant matters in accordance with this Regulation, or the relevant matters after modification fail to comply with this Regulation, the regulatory department shall order it to take corrective action within a prescribed time limit; and if it fails to do so, shall impose a fine of not less than 50,000 yuan but not more than 100,000 yuan on it; and if the circumstances are serious, shall order the company to cease business operation for rectification.
Article 39 Where a financing guarantee company makes investment upon entrustment, the regulatory department shall order it to take corrective action within a prescribed time limit, and impose a fine of not less than 500,000 yuan but not more than one million yuan on it; if there is any illegal income therefrom, the illegal income shall be confiscated. If the company fails to take corrective action within the prescribed time limit, it shall be ordered to cease business operation for rectification, and if the circumstances are serious, its financing guarantee business permit shall be revoked.
Where a financing guarantee company absorbs public deposits or does so in any disguised form, or offers self-operated loans or entrusted loans, it shall be punished in accordance with the relevant laws and administrative regulations.
Article 40 Where a financing guarantee company falls under any of the following circumstances, the regulatory department shall order it to take corrective action within a prescribed time limit; and if it fails to do so, shall impose a fine of not less than 100,000 yuan but not more than 500,000 yuan on it. If there is any illegal income therefrom, the illegal income shall be confiscated and it may be ordered to cease business operation for rectification, and if the circumstances are serious, its financing guarantee business permit shall be revoked.
(1) The ratio of balance of guarantee liability to its net assets fails to comply with relevant provisions.
(2) The conditions for its provision of financing guarantee to the controlling shareholder or actual controller, or the provision of financing guarantee to any other affiliated party are better than the conditions for the provision of the same type of guarantee to a non-affiliated party.
(3) It fails to withdraw the corresponding reserve fund as required.
(4) The use of self-owned funds fails to comply with the provisions of the state on the safety and liquidity of assets of financing guarantee companies.
Article 41 Where a financing guarantee company fails to submit the business operation report, financial report, annual audit report or any other documents, materials or that on business implementation to the regulatory department as required, or fails to report the serious risk incident, the regulatory department shall order it to take corrective action within a prescribed time limit, and impose a fine of not less than 500,000 yuan but not more than 200,000 yuan on it. If the company fails to take corrective action within the prescribed time limit, it shall be ordered to cease business operation for rectification, and if the circumstances are serious, its financing guarantee business permit shall be revoked.
Article 42 Where a financing guarantee company falls under any of the following circumstances, the regulatory department shall order it to take corrective action within a prescribed time limit, and impose a fine of not less than 200,000 yuan but not more than 500,000 yuan on it. If the company fails to take corrective action within the prescribed time limit, it shall be ordered to cease business operation for rectification, and if the circumstances are serious, its financing guarantee business permit shall be revoked. If any violation of public security administration is constituted, the company shall be punished in accordance with the Law of the People's Republic of China on Public Security Administration Punishments; and if any crime is constituted, the company shall be subject to criminal liability in accordance with the law.
(1) Refusing to accept or obstructing the supervision and inspection conducted by the regulatory department in accordance with the law.
(2) Providing to the regulatory department any false business operation report, financial report, annual audit report or any other documents and materials.
(3) Refusing to take the measure prescribed by the regulatory department in accordance with paragraph 1 of Article 30 of this Regulation.
Article 43 Where a fine is imposed on the financing guarantee company in accordance with this Regulation, the directly liable director, supervisor or senior executive may be imposed on a fine of not more than 50,000 yuan at the same time, in light of the actual circumstances.
Where a financing guarantee company violates this Regulation and the circumstances are serious, the regulatory department may prohibit the directly liable director, supervisor or senior executive from serving as the director, supervisor or senior executive of the financing guarantee company within a certain period of time or lifelong.
Article 44 Where any staff member of the regulatory department abuses power, neglects duty, practices favoritism, or makes falsification in the supervision and administration of the financing guarantee company, the staff member shall be subject to disciplinary actions in accordance with the law. If any crime is constituted, the member shall be subject to criminal liability in accordance with the law.
Chapter VI Supplementary Provisions
Article 45 Financing guarantee industry organizations shall, in accordance with the provisions of laws, regulations and bylaws, play the role of services, coordination and industry self-discipline, and direct financing guarantee companies to conduct business operations in accordance with the law and have fair competition.
Article 46 The direct formation of business institutions by government funds or government departments to conduct the financing guarantee business for the purpose of promoting employment and entrepreneurship, among others, shall be governed by the relevant provisions of the state.
This Regulation shall not apply to the implementation of the guarantee business by rural mutual-assistance financing guarantee organizations, and forest right acquisition, storage and guarantee business among forestry business operators.
Article 47 The measures for the administration of financing re-guarantee companies shall be otherwise developed by the banking regulatory authority of the State Council jointly with relevant departments of the State Council, and be reported to the State Council for approval.
Article 48 Where a financing guarantee company formed before this Regulation comes into force fails to meet the conditions prescribed in this Regulation, it shall meet the conditions prescribed in this Regulation within the time limit prescribed by the regulatory department. If it fails to meet the prescribed conditions within the prescribed time limit, it shall not conduct any new financing guarantee business.
Article 49 This Regulation shall come into force on October 1, 2017.