发布文号: No. 1 Order of China Banking Regulatory Commission in 2004
（Issued by No. 1 Order of China Banking Regulatory Commission in 2004; as amended according to the Decision on Amending the Interim Measures for the Business Management of Derivative Product Transactions of Financial Institutions adopted at the 55th Chairmen's Meeting of China Banking Regulatory Commission on December 28, 2006）
Chapter I General Provisions
Article 1 In order to standardize the management of the derivative product transactions of financial institutions, to effectively control the risks of the financial institutions engaged in the derivative product transactions, these Measures have been made in accordance with the Banking Supervision Law of the People's Republic of China, the Commercial Bank Law of the People's Republic of China and other relevant laws and administrative regulations.
Article 2 A "financial institution" as mentioned in these Measures shall refer to a bank, trust company, finance company, financial leasing company or automobile finance company as a legal person formed within the territory of the People's Republic of China, or a foreign bank branch set up within China （the "foreign bank branch"）.
Article 3 A "derivative product" as mentioned in these Measures shall refer to a financial contract with its value depending on one kind or a number of underlying assets or indexes and the basic categories of such contracts include forwards, futures, swaps and options. The derivative product also includes the structured financial instruments with features of one or more of the forwards, futures, swaps and options.
Article 4 The business of derivative product transactions of a financial institution as mentioned in these Measures may be divided into two categories:
（a） The derivative product transactions conducted by financial institutions for the purpose of avoiding risks on their own assets or debts or seeking profits. The financial institution engaged in such operations is considered as the end user of derivative products.
（b） The services of derivative product transactions provided by a financial institution to its clients （including a financial institution）. The financial institution engaged in such operations is considered as a dealer of derivative products, and a dealer that can provide quoted prices of derivative products and transaction services to other dealers and clients is considered as a market maker of derivative products.
Article 5 China Banking Regulatory Commission （the "CBRC"） is an institution authorized to supervise and regulate the financial institutions engaged in derivative product transactions. A financial institution launching the business of derivative product transactions shall be subject to the examination and approval and accept the supervision and inspection of the CBRC.
A financial institution qualified to launch the business of derivative product transactions shall carry out the business operations appropriate for its own risk management ability. Before launching a business of complicated derivative product transactions of first impression within China, a financial institution shall submit the relevant materials to the regulatory authority, and solicit opinions in writing from the regulatory authority.
Article 6 A financial institution carrying out derivative product transactions related to foreign exchange, stocks or commodities or floor derivative product transactions shall comply with the state regulations on the management of foreign exchange and others.
Chapter II Management of Market Entry
Article 7 A financial institution applying for launching the business of derivative product transactions shall meet the following conditions:
（a） It has a sound risk management system and an internal control system for derivative product transactions;
（b） It has a sound operating system for derivative product transactions with automatic linking of the front, middle and back offices and a real-time risk management system;
（c） The person in charge of derivative product transactions shall have 5 or more years of experience in the direct participation in the derivative product transactions and risk management, and have no bad record;
（d） It shall have 2 or more dealers who have dealt in derivative product transactions or other related transactions for at least two years and have accepted special training on skills for dealing in derivative products, one or more risk management person（s）, one or more risk model researcher（s） or risk analyzer（s）; any of the persons above shall be post-specific and shall not hold concurrent posts, without any bad record;
（e） It shall have proper transaction premises and equipment;
（f） A foreign bank branch applying for launching the business of derivative product transactions must obtain the formal authorization of its parent bank （or regional head office）, its mother country shall have a regulatory legal framework for the business of derivative product transactions, and the regulatory authority of its mother country shall have the corresponding regulatory capability; and
（g） Other conditions as set forth by the CBRC.
A foreign bank branch applying for launching the business of derivative product transactions shall meet the conditions as set forth above. Where the foreign bank branch doesn't meet the conditions as set forth in （a） through （e） above, its parent bank （or regional head office） shall meet the above conditions, and the foreign bank branch shall meet conditions （f） and （g） above and the following conditions:
（a） The formal authorization of its parent bank （or regional head office） on its carrying out the business of derivative product transactions shall expressly provide for the type and quota of transactions; and
（b） Except as otherwise expressly provided for by the parent bank, all the derivative product transactions of the branch shall be uniformly conducted in real time through the system of the authorizing parent bank （or regional head office）, and the parent bank （or regional head office） shall uniformly balance the transactions and conduct exposure management and risk control.
Article 8 Where a policy bank or Chinese-funded commercial bank （other than an urban commercial bank, rural commercial bank or rural cooperative bank） applies for launching the business of derivative product transactions, it shall file an application with the CBRC uniformly via its legal person, subject to the examination and approval by the CBRC.
A trust company, finance company, financial leasing company or automobile finance company launching the business of derivative product transactions shall submit the application materials to the local CBRC office uniformly via its legal person, and upon obtaining a consent after examination, shall submit the same to the CBRC for examination and approval.
An urban commercial bank, rural commercial bank or rural cooperative bank applying for launching the business of derivative product transactions shall submit the application materials to the local CBRC office uniformly via its legal person, and upon obtaining a consent after examination, shall submit the same to the CBRC for examination and approval.
A business institution of a foreign bank applying for launching the business of derivative product transactions shall submit the application materials with authorized signatures to the local CBRC office, and upon obtaining a consent after examination, shall submit the same to the CBRC for examination and approval. A foreign bank intending to have two or more of its branches to launch the business of derivative product transactions within China may submit the application materials to the local CBRC office uniformly via the head office of the foreign-funded legal person institution or the major reporting bank of the foreign bank, and upon obtaining a consent after examination, shall submit the same to the CBRC for examination and approval.
Article 9 A financial institution applying for launching the business of derivative product transactions shall submit the following documents and materials （in triple） to the CSRC or its dispatched office:
（a） The application report on launching the business of derivative product transactions, feasibility report and business plan or transaction development plan;
（b） The regulations and rules concerning the internal management of derivative product transactions;
（c） The accounting system of derivative product transactions;
（d） The list and resumes of the persons in charge and major dealers;
（e） The authorization management system for the risk exposure quantification or limits;
（f） The testing report on the safety of the transaction premises, equipment and system; and
（g） Other documents and materials as required by the CSRC.
A foreign bank branch applying for launching the business of derivative product transactions that doesn't meet the conditions as set forth in （a） through （e） in paragraph 1 of Article 7 shall also submit the following documents to the CBRC office at the place where the foreign bank branch is located, in addition to the documents and materials above that shall be submitted to its parent bank （or regional head office）:
（a） The formal written authorization of its parent bank （or regional head office） on the type and quota of derivative product transactions carried out by the branch; and
（b） Except as otherwise expressly provided for by the parent bank, the letter of undertaking issued by its parent bank or （or regional head office） to ensure that all of the derivative product transactions of the branch shall be conducted in real time through the system of the authorizing parent bank （or regional head office）, and that the parent bank （or regional head office） shall balance the transactions and conduct the exposure management and risk control.
Article 10 The accounting rules on the derivative product transactions submitted by a financial institution shall conform to the relevant accounting standards in China. In the absence of the relevant provisions in China, such accounting rules shall conform to the relevant international standards. A foreign bank branch may adopt the accounting standards in its mother country or of its parent bank.
Article 11 The testing report on the safety of the transaction place, equipment and system provided by a financial institution as required by these Measures shall be, in principle, a testing report on the safety of the transaction place, equipment and system prepared by a third party.
Article 12 The internal management regulations and rules for a financial institution launching the business of derivative product transactions shall at least include the following:
（a） The guiding principles for the business of derivative product transactions, operating procedures （which shall embody the principle of separation of transactions in the front, middle and back offices） and emergency response plan;
（b） The risk model indicators and quantification management indicators for derivative product transactions;
（c） The type of transactions and the risk control system;
（d） The risk reporting system and the internal audit system;
（e） The management system and post-assessment system for the research and development of derivative product transactions;
（f） The code of conduct for dealers;
（g） The post responsibility system for persons in charge of transactions and the accountability system and incentive and restriction mechanism for the persons in charge at all levels and dealers;
（h） The training plans for the persons in charge and working personnel of the front, middle and back offices; and
（i） Other contents as required by the CBRC.
Article 13 The CBRC shall give a reply to a financial institution within 60 days from the day when it receives the complete set of materials submitted by the financial institution in accordance with these Measures.
Article 14 Where a financial institution as a legal person within China authorizes any of its branches to operate the business of derivative product transactions, it shall strictly examine the risk management capabilities of the branch, and shall issue formal authorization documents in writing regarding the types and limits of transactions. All the derivative product transactions of the branch shall be uniformly conducted in real time through the system of its parent bank （or region head office）, and the parent bank （or region head office） shall uniformly balance the transactions and conduct exposure management and risk control
Any of the branches above shall report to the local CBRC office upon the strength of the authorization documents issued by the parent bank （or region head office） within 30 days as of the date when it receives the authorization from its parent bank （or region head office） or when such authorization is changed.
Chapter III Risk Management
Article 15 A financial institution shall determine whether it is able to be engaged in derivative product transactions and their types and scales in light of its operating objectives, capital strength, managerial ability and the risk characteristics of derivative product transactions.
Article 16 A financial institution shall establish, according to the categories of derivative product transactions as set forth in Article 4, a risk management system, internal control system and operating system appropriate for the nature, scale and complexity of the business of derivative product transactions operated by it.
Article 17 The board of directors of a financial institution shall evaluate the policies and procedures for the risk management of current derivative products at least annually to ensure that they are consistent with the institution's capital strength and management level. Where new products are frequently launched or material changes to the system have taken place, the frequency of evaluation shall be increased accordingly.
Article 18 The senior managerial personnel of a financial institution shall understand the risks of derivative product transactions that they are engaged in; shall examine, approve and evaluate a comprehensive management framework covering the principles, procedures, organizations and powers for the operation and risk management of the business of derivative product transactions; and shall be able to acquire the information related to the risks of derivative product transactions at any time through the risk management department and a sound check and reporting system, and conduct the proper supervision and guidance on this basis.
Article 19 The senior managerial personnel of a financial institution shall decide the indicators and methods for measuring the risk exposure of derivative product transactions appropriate for its business, and based on its overall strength, self-owned capital, profitability, business operation guidelines and market risk forecast, shall decide and regularly examine and update the risk exposure limits, loss limits and emergency response plans and establish the procedures for monitoring and handling information on limits.
The senior managerial personnel of a financial institution in charge of the risk management and control over the business of derivative product transactions must be separated from the senior managerial personnel in charge of the transactions or marketing of derivative products, and they shall not assume offices concurrently.
Article 20 The working personnel of a financial institution carrying out risk measurement, monitoring and control must be separated from the personnel carrying out the transaction or marketing of derivative products, and they shall not take posts concurrently; the personnel carrying out the risk measurement, monitoring and control may report the risk condition directly to the senior management.
Article 21 A financial institution shall establish and strictly implement the system of authorization and loss limit. A financial institution conducting a derivative product transaction must strictly implement the graded authorization and exposure risk management systems, and any material transaction or new business of derivative product transactions shall be subject to the approval of the board of directors or the consent of the senior management designated by the board of directors. In the case of floating loss on book due to market changes or a lapse in the decision making, the system of loss limit shall be strictly implemented.
Article 22 A financial institution shall establish definite standards for determining the professional qualifications of dealers, analyzers and other practitioners, and provide training to the salesmen and other operating personnel in light of the complexity of the derivative product transactions and risk management, to ensure that they have necessary skills and qualifications.
Article 23 A financial institution shall establish relevant policies on the evaluation of the appropriateness of a transaction counterparty, including: the evaluation of whether the transaction counterparty has full knowledge of the contractual terms and obligations to perform the contract, identification of whether the proposed derivative product transaction is in line with the aim of the transaction counterparty engaged in such derivative product transaction, and assessment of the credit risks of the transaction counterparty.
With regard to derivative product transactions with high risks, a financial institution shall make special rules on the qualifications and conditions of its transaction counterparties.
When implementing the provisions of this Article, a financial institution may reasonably rely on the formal written documents submitted by its transaction counterparties, on the principle of good faith.
Article 24 A financial institution engaged in the business of derivative product transactions for a institution or individual within China shall fully reveal the risks on derivative product transactions to such an institution or individual, from which a letter of confirmation that such a institution or individual is aware and capable of bearing the risks on the derivative product transactions shall be obtained.
The information disclosed by a financial institution to such an institution or individual shall include at least the following:
（a） The abstracts of the provisions of and intrinsic risks under a derivative product contract; and
（b） The important factors that affect the potential loss of derivative products.
Article 25 A financial institution shall properly and reasonably adopt credit risk mitigation measures such as security to reduce credit risks, select appropriate methods and models to assess credit risks, and take relevant risk control measures.
Article 26 A financial institution shall adopt appropriate risk assessment methods or models to assess the market risks on derivative product transactions, and manage the market risks and adjust the transaction scales, categories and levels of risk exposure on the principle of market price.
Article 27 In light of the scales and categories of derivative product transactions, a financial institution shall make sufficient arrangements on fluidity, shall ensure its sufficient ability in performing the contract in any abnormal market transaction.
Article 28 A financial institution shall establish and enhance the mechanism and system for controlling operating risks so as to strictly control operating risks.
Article 29 A financial institution shall clarify in writing the powers and responsibilities of the person in charge of and dealers of derivative product transactions, the accountability system shall be strictly implemented, and specific rules on punishing a transactor or person in charge who acts ultra vires or violates a regulation in a transaction shall be in place.
Article 30 A financial institution shall reasonably establish a cost and asset analysis and estimate system and an incentive and restriction mechanism, and shall not link the remunerations of personnel of derivative product transactions and risk management simply to the profits from derivative product transactions so as to avoid the increased transaction risks due to their excessive pursuance of benefits.
Article 31 A financial institution shall implement the regular post shift and compulsory paid leave on the persons in charge of and dealers of derivative product transactions.
Article 32 A financial institution shall establish and enhance the mechanism and system for controlling legal risks, and strictly examine the legal statuses and transaction qualifications of its transaction counterparties. A financial institution entering into a contract on a derivative product transaction with a transaction counterparty shall refer to the international practices, fully take into account such factors as operability of recourse and preservation by legal means after occurrence of an event of default, and take effective measures to prevent the legal risks arising from the drafting, negotiating and signing of a transaction contract.
Article 33 A financial institution shall submit the accounting, statistical and other statements related to derivative product transactions to the CBRC, according to the provisions of the CBRC.
A financial institution shall disclose information on the risks, losses, profits and abnormalities in conducting derivative product transactions, according to the provisions on information disclosure of the CSRC.
Article 34 The internal audit department of a financial institution shall regularly inspect the implementation of the system of risk management of the business of derivative product transactions. Finding any material risk in the business of derivative product transactions, the internal audit department shall promptly take effective measures to stop the expansion of losses, and timely report the relevant information to the regulatory authority.
Article 35 The CBRC has the power to examine the data and statements related to derivative product transactions of a financial institution at any time, to regularly examine whether the risk management system, internal control system and operating system of the financial institution are appropriate for the types of business of derivative product transactions operated by it.
Article 36 Where a financial institution engaged in derivative product transactions incurs any serious business risk or loss, it shall timely and voluntarily report it to the CBRC, and submit the counter measures.
Where there is any important change to the derivative product transactions, operating system or risk management system of a financial institution, the financial institution shall timely and voluntarily report the specific situation to the CBRC.
Where the authorization granted to a foreign bank branch by its overseas parent bank （or regional head office） changes, the foreign bank branch shall timely and voluntarily report on it to the CBRC.
Article 37 A financial institution shall properly preserve all the transaction records of derivative product transactions and documents, accounts, original vouchers and phone records related to such transactions. The phone records shall be kept for half a year or longer and other materials shall be kept for 3 years after the expiration of a transaction contract for the purposes of verification, except as especially required by the accounting system.
Chapter IV Provisions on Punishment
Article 38 Where a dealer of derivative products operates in violation of these Measures and the relevant provisions of his institution, causing serious economic loss to this institution or to its client, the financial institution shall impose a disciplinary punishment, from a demerit to dismissal, on the direct responsible senior management personnel, other persons directly in charge of the business and direct liable persons; where any crime is constituted, they shall be transferred to the judicial organ for criminal liabilities according to law.
Article 39 Where any financial institution conducts derivative product transactions without approval, it shall be punished by the CBRC in accordance with the Measures for Punishment against Financial Violations.
Article 40 Where a financial institution fails to submit the relevant reports and statements or materials or disclose information on the derivative product transactions in accordance with these Measures or the requirements of the CBRC, it shall be punished by the CBRC as per the nature of the financial institution in accordance with the Banking Supervision Law of the People's Republic of China, the Commercial Bank Law of the People's Republic of China, the Administrative Regulations on Foreign-Funded Financial Institutions of the People's Republic China and other relevant laws, administrative regulations and financial administrative rules.
A financial institution that provides false information on derivative product transactions or offers information concealing important facts shall be punished by the CBRC according to the Measures for Punishment against Financial Violations.
Article 41 The CBRC, finding a financial institution failing to effectively implement the risk management system and internal control system necessary for derivative product transactions, shall suspend or terminate its qualification for conducting derivative product transactions.
Chapter V Supplementary Provisions
Article 42 The CBRC shall be responsible for the interpretation of these Measures.
Article 43 These Measures shall be effective as of March 1, 2004. Where any provision on the derivative product transactions of financial institutions issued previously is contrary to these Measures, these Measures shall prevail.
Where any law or administrative regulation provides otherwise for any matter provided for in these Measures, such law or administrative regulation shall prevail.