· Area of Law： Companies Banking & Finance

· Level of Authority： Administrative Regulations

· Date issued：11-10-2000

· Effective Date：11-10-2000

· Issuing Authority： State Council

· Status： Effective

· Pkulaw Note：For its changes, please refer to: Decision of the State Council on the Cancellation and Adjustment of the Third Batch of Administrative Approval Items ; Decision of the State Council on Cancellation and Adjustment of the Sixth Batch of Administrative Approval Items 

Order of the State Council of the People's Republic of China
(Order No. 297)
The Regulation on Financial Asset Management Companies, which was adopted at the 32nd executive meeting of the State Council on November 1, 2000, is hereby promulgated and shall come into force as of the day of promulgation.
Premier Zu Rongji
November 10, 2000
Regulation on Financial Asset Management Companies
Chapter I General Provisions
Article 1 The present Regulation is formulated in order to regulate the activities of financial asset management companies, dispose of the non-performing loans (NPLs) of state-owned banks according to law and promote the reform and development of state-owned banks and enterprises.
Article 2 The term “financial asset management company” refers to a wholly state-owned non-banking financial institution that has been established upon the decision of the State Council to purchase the NPLs of state-owned banks as well as to manage and dispose of any assets resulting from purchase of the NPLs of state-owned banks.
Article 3 A financial asset management company shall establish a major business target of preserving assets and reducing losses to the largest extent and independently bear its civil liabilities according to law.
Article 4 The People's Bank of China, the Ministry of Finance and China Securities Regulatory Commission shall, according to their respective statutory functions and duties, carry out supervision and administration of financial asset management companies.
Chapter II Establishment and Business Scope of Financial Asset Management Companies
Article 5 The registered capital of a financial asset management company shall be RMB 10 billion yuan, which shall be subject to the examination and allocation of the Ministry of Finance.
Article 6 A financial asset management company shall hold a License of Legal-person Financial Institutions as issued by the People's Bank of China and shall go to the administrative department for industry and commerce to handle the formalities for registration according to law.
Article 7 The establishment of any branch of a financial asset management company shall be subject to the approval of the Ministry of Finance as well as be reported to the People's Bank of China for approval. A newly established branch shall hold a Business License of Financial Institutions as issued by the People's Bank of China and shall go to the administrative department for industry and commerce to handle the formalities for registration according to law.
Article 8 A financial asset management company shall have a president and several vice-presidents, who shall be subject to the appointment of the State Council. The president shall exercise his power on behalf of the financial asset management company to the outside and take charge of the business operation and management of the financial asset management company.
The post-holding qualification of senior managers of a financial asset management company shall be subject to the examination of the People's Bank of China.
Article 9 The composition, functions and duties as well as working procedures of the board of supervisors of a financial asset management company shall be implemented according to the Interim Regulation on the Board of Supervisors of Important State-owned Financial Institutions.
Article 10 A financial asset management company may, within the scope of the NPLs of state-owned banks as purchased thereby, undertake the following practice when managing and disposing of any asset resulting from purchase of the NPLs of state-owned banks:
(1) Recoursing debts;
(2) Leasing any asset resulting from the NPLs as purchased thereby or transferring or reorganizing the aforesaid asset by any other means;
(3) Swapping debt right to stock right and holding stocks of the relevant enterprise on a stage basis;
(4) Recommending the listing of a company that falls into its scope of asset management as well as underwriting the bonds and stocks thereof;
(5) Issuing financial bonds and borrowing loans from financial institutions;
(6) Undertaking financial or legal consulting as well as the appraisal of assets and projects; and
(7) Undertaking any other practice as approved by the People's Bank of China and China Securities Regulatory Commission.
A financial asset management company may apply for a re-loan with the People's Republic of China.
Chapter III Scope, Ration and Fund Sources of NPL Purchase
Article 11 A financial asset management company shall, according to the scope and ration as decided by the State Council, purchase the NPLs of state-owned banks. Any purchase that oversteps the scope and ration as decided shall be subject to a special examination of the State Council.
Article 12 Within the scope of ration as decided by the State Council, a financial asset management company may purchase the relevant credit principal as well as the corresponding uncollected receivable interests that shall be calculated into the gains and losses in light of the relevant book value. For any uncollected receivable interests that haven't been calculated into the gains and losses, a free transfer shall be made,
Article 13 Where a financial asset management company purchases any NPL, it instantly obtains all the rights as held by the original creditor on the debtor. The debtor, guarantor as well as the relevant parties concerned of an original loaning contract shall continue to perform their obligations as stipulated by the contract.
Article 14 The fund sources for a financial asset management company to purchase NPLs include:
(1) Transferring some re-loans as granted by the People's Bank of China to a wholly state-owned commercial bank; and
(2) Issuing financial bonds.
Where any re-loan as granted by the People's Bank of China to a wholly state-owned commercial bank is transferred to a financial asset management company, a fixed interest rate shall be applied, whereby the annual interest rate shall be 2.25 %.
Article 15 Where a financial asset management company issues any financial bond, it shall be subject to the examination and approval of the People's Bank of China in collaboration with the Ministry of Finance.
Chapter IV Debt-equity Swap
Article 16 A financial asset management company may swap the debt right as acquired in the process of purchasing the NPLs of state-owned banks to the stock right of the borrowing enterprises.
The stock right as held by a financial asset management company may not be limited to the proportion regarding the net asset or registered capital of the company therein.
Article 17 A debt-equity swap shall comply with the industrial policies of the state, be conducive to optimizing the economic structure and promoting the technical progress and product upgrading of the relevant enterprise.
Article 18 The state economic and trade commission shall recommend the relevant enterprise that undertakes a debt-equity swap to a financial asset management company. A financial asset management company shall carry out an independent appraisal on the enterprise as recommended, formulate a plan of enterprise debt-equity swap and conclude an agreement on debt-equity swap with the relevant enterprise. The plan and agreement of debt-equity swap shall be subject to the examination of the state economic and trade commission in collaboration with the Ministry of Finance and the People's Bank of China and be reported to the State Council for approval before implementation.
Article 19 An enterprise that undertakes a debt-equity swap shall, according to the requirements of modern corporate system, transfer its operational mechanism, establish a standardized corporate governance structure and intensify its enterprise management. The relevant local people's government shall help an enterprise to downsize its staff and improve its efficiency, divert laid-off workers and take away the function of social management from an enterprise.
Article 20 Where a financial asset management company concludes a debt-equity swap, it may, as a shareholder of the relevant enterprise, designate its personnel to attend the board of directors as well as the board of supervisors of the enterprise so as to exercise its shareholders' right.
Article 21 The stock right of an enterprise as held by a financial asset management company may be transferred to investors at home and abroad according to the relevant provisions of state or may be recalled by the enterprise that has gone through a debt-equity swap according to law.
Article 22 Where an enterprise has gone through a debt-equity swap, it shall handle the formalities for registration of alteration of enterprise property right, etc. according to the relevant provisions of the state.
Article 23 The state economic and trade commission shall take charge of organizing, guiding and coordinating any debt-equity swap of an enterprise.
Chapter V Operation and Management of Financial Asset Management Companies
Article 24 A financial asset management company shall adopt a business target responsibility system.
The Ministry of Finance shall, according to the quality of NPLs, determine the business target of a financial asset management company regarding NPL disposal and carry out the relevant examination and supervision.
Article 25 A financial asset management company shall, according to the features of NPLs, formulate business guidelines and relevant measures, improve its internal management structure as well as establish an internal restriction and incentive mechanism.
Article 26 Where a financial asset management company manages or disposes of any asset resulting from purchase of the NPLs of state-owned assets, it shall carry out its business operation according to the principles of openness, competition and selecting the best.
Where a financial asset management company transfers any asset, such means as bidding or auction shall be adopted.
Where any debt right of a financial asset management company fails to be paid off due to such reasons as bankruptcy of a debtor, it shall be handled according to the relevant provisions of the State Council.
The measures for the administration of asset disposal of financial asset management companies shall be formulated by the Ministry of Finance.
Article 27 A financial asset management company may, according to the requirements of its business operation, employ an intermediary organization with such qualification as accounting, asset appraisal and legal services to assist in its business.
Article 28 A financial asset management company may be exempted from the relevant taxes regarding its business operation of purchasing the NPLs of state-owned banks or undertaking or disposing of any asset resulting from purchase of the NPLs of state-owned banks. The specific measures thereof shall be formulated by the Ministry of Finance in collaboration with the State Administration of Taxation.
A financial asset management company may be exempted from administrative charges such as the registration fee of industry and commerce.
Article 29 A financial asset management company shall, according to the requirements of the relevant departments such as the People's Bank of China, the Ministry of Finance and China Securities Regulatory Commission, report financial statements, statistical statements as well as any other relevant materials thereto.
Article 30 A financial asset management company shall be subject to auditing supervision of the auditing organ according to law.
A financial asset management company shall employ the certified public accountants who have been recognized by the Ministry of Finance to carry out an annual auditing on its financial status and shall report its auditing report to all the relevant departments in charge of administration and supervision in a timely manner.
Chapter VI Termination and Liquidation of Financial Asset Management Companies
Article 31 Where a financial asset management company is terminated, the Ministry of Finance shall organize a liquidation group for its liquidation.
Article 32 For any final loss that results from NPL disposal as conducted by a financial asset management company, the Ministry of Finance shall set forth a plan of solution and report it to the State Council for approval and implementation.
Chapter VII Supplementary Provisions
Article 33 Where a financial asset management company violates any law or administrative regulation on finance, the People's Bank of China shall give a punishment thereto according to the relevant laws and the Measures for Punishments against Financial Illegal Acts. Where a financial asset management company violates any other law or administrative regulation, the relevant department shall give a punishment thereto according to law. Where a crime has been constituted, the criminal liabilities shall be investigated for according to law.
Article 34 The present Regulation shall come into force as of the day of promulgation.