Promulgation Authorities： the China Banking and Insurance Regulatory Commission
Release Date： 2020.05.26
Effective Date： 2020.05.26
Doc Number： Yin Bao Jian Fa [2020] No. 22
Notice of the China Banking and Insurance Regulatory Commission on Promulgation of the Interim Measures for the Supervision and Administration of Finance Leasing Companies
Yin Bao Jian Fa [2020] No. 22
The municipal people's governments of all provinces, autonomous regions, centrally-administered municipalities and cities with independent planning status and Xinjiang Production and Construction Corps:
As determined at the National Financial Work Conference in 2017, the Central Government will formulate unified rules for finance leasing companies and other institutions, while local governments will be responsible for implementing regulation and strengthening the responsibility for risk disposal within their respective jurisdictions. For the purposes of further strengthening supervision and administration of finance leasing companies, standardizing operation activities, preventing and resolving risks, promoting standardized and orderly development of the finance leasing industry, pursuant to the relevant laws and regulations and division of work determined by the National Financial Work Conference, the China Banking and Insurance Regulatory Commission has formulated the Interim Measures on the Supervision and Administration of Finance Leasing Companies which are hereby promulgated for your compliance.
China Banking and Insurance Regulatory Commission
May 26, 2020
Interim Measures for the Supervision and Administration of Finance Leasing Companies
Chapter I General Provisions
Article 1 These Measures are formulated pursuant to the relevant laws and regulations for the purposes of implementing regulatory responsibilities, standardizing supervision and administration, guiding compliant operations of finance leasing companies, and promoting standardized development of the finance leasing industry.
Article 2 The term "finance leasing companies" as mentioned herein refers to the limited liability companies or joint stock limited companies (excluding finance leasing companies) that engage in the finance leasing business.
The term "finance leasing business" as mentioned herein refers to transaction activities whereby a lessor, in accordance with the selection of lessee on seller and leased property, purchases the leased property from the seller and provide the leased property for the lessee to use, for which the lessor pays the rent.
Article 3 Persons engaging in finance lease activities shall comply with the laws and regulations and adhere to the principles of honesty, trustworthiness and fairness, and shall not harm State interests, public interest and the legitimate rights and interests of others.
Article 4 All regions are encouraged to increase policy support, guide finance leasing companies to play an important role in promoting the development of the equipment manufacturing industry, technological upgrading and transformation of enterprises, equipment import and export, and other aspects, so as to better serve the real economy and achieve high-quality development of the industry.
Chapter II Operation Rules
Article 5 Finance leasing companies may engage in some or all of the following business:
(I) Finance leasing business;
(II) Leasing business;
(III) Purchase, residual value disposal and maintenance of leased property related to finance leasing and lease business, lease transaction consulting, and acceptance of lease deposit;
(IV) Transfer or being transferred of finance leasing or leased assets; and
(V) Fixed-income securities investment business.
Article 6 The financing activities of the finance leasing companies shall comply with the relevant laws and regulations.
Article 7 Unless it is otherwise prescribed, the leased property subject to finance leasing shall be fixed assets.
The finance leasing companies shall carry out finance leasing business based on the leased property with clear ownership, real existence and capable of generating income. Finance leasing companies may not accept any property that has been mortgaged, whose ownership is in dispute, or that has been sealed up or detained by any judicial authority, or whose ownership is defective as leased property.
Article 8 Finance leasing companies shall not have the following business or activities:
(I) Illegally raising funds, accepting deposits or accepting deposits in a disguised form;
(II) Making loans or acting as trustee to make loans;
(III) Calling loans with other finance leasing companies or doing so in a disguised form;
(IV) Raising funds or transferring assets through P2P lending information intermediaries or private investment funds; or
(V) Other business or activities prohibited by laws and regulations, the China Banking and Insurance Regulatory Commission (hereinafter referred to as the "CBIRC") and local financial regulatory authorities of provinces, autonomous regions and centrally-administered municipalities (hereinafter referred to as the "provincial level").
Article 9 Where the leased properties imported by finance leasing companies involve quota and license management, the purchasers of the said leased properties or owners of the property rights thereof shall go through the relevant formalities in accordance with relevant provisions, unless otherwise agreed.
Finance leasing companies which involve foreign exchange administration matters in their business process shall comply with the relevant foreign exchange administration provisions of the State.
Article 10 Finance leasing companies shall establish and improve their organizational structures with shareholders or shareholders' (general) meeting, board of directors (executive director), supervisors (board of supervisors) and senior management as the main bodies, specify the division of responsibilities, ensure independent operation and effective checks and balances among them, and form scientific and efficient decision-making, incentive and constraint mechanisms.
Article 11 Finance leasing companies shall establish and improve the internal control system pursuant to the principles of comprehensiveness, prudence, effectiveness and independence to ensure safe and stable operations of the company.
Article 12 Finance leasing companies shall, according to their organizational structures, business scales and complexity, establish a comprehensive risk management system to identify, control and mitigate risks.
Article 13 Finance leasing companies shall establish an affiliated transaction management system; their affiliated transactions shall comply with commercial principles, be carried out independently and fairly priced, and shall not be more preferential than non-affiliated transactions of the same type.
When the finance leasing companies vote or make decisions on the transactions in which the lessee is an affiliated enterprise, any person who is related to such affiliated transactions shall rescue himself/herself from the voting or decision making. Major affiliated transactions of finance leasing companies shall be approved by shareholders' (general) meeting, the board of directors or their authorized organs.
The regulatory requirements of these Measures on affiliated transactions shall not apply to transactions between finance leasing companies and their holding subsidiaries and project companies.
Article 14 Finance leasing companies shall obtain the ownership of the leased property in a lawful manner.
Article 15 Where the ownership of leased property shall be registered in accordance with the provisions of national laws and regulations, finance leasing companies shall go through the relevant registration formalities in accordance with the law. Where the leased property falls outside the category of property required to be registered, the finance leasing companies shall take effective measures to protect the legitimate rights and interests of the leased property.
Article 16 Finance leasing companies shall, under the precondition of signing finance lease contract or specifying the intention of finance lease business, purchase leased property as required by the lessee. Where there is a need for purchase of leased property in advance under special circumstances, the prepayment shall be consistent with the enterprise's existing business areas or business planning, and match the enterprise's risk management capacity and specialized business level.
Article 17 Finance leasing companies shall establish and improve the value assessment and pricing system for leased property, and determine the level of rental based on the value, other costs and reasonable profits of the leased property.
In a sale and leaseback transaction, finance leasing companies shall set the purchase price of the leased property with reference to the pricing basis that is reasonable and not against the accounting standards, and shall not pay high price for the leased property of low value.
Article 18 Finance leasing companies shall attach importance to the risk mitigation role of leased properties, closely monitor the risk coverage level of the leased property's value for claims under finance leases, and develop effective risk response measures.
Article 19 Finance leasing companies shall strengthen the management of unguaranteed residual value of leased property, regularly assess whether the unguaranteed residual value is impaired, and timely make provisions for impairment loss according to the requirements of the accounting standards.
Article 20 Finance leasing companies shall strengthen the risk management of the leased property returned upon expiration of the lease term or taken back due to breach of contract by the lessees, and establish a sound system and procedures for disposal of the leased property, so as to reduce the risks of leased property in the holding period.
Article 21 Finance leasing companies shall separately manage the assets under finance lease in forms such as sublease, and establish separate accounts. The sublease shall be subject to the consent of the lessor.
Article 22 Finance leasing companies shall, in strict accordance with the accounting standards and other relevant regulations, truthfully reflect the nature and risk status of the transfer and being transferred of finance leasing assets.
Article 23 Finance leasing companies shall establish an assets quality classification system and a provision system. They shall also make provision for impairment loss of assets in time and in full on the basis of accurate classification to enhance their capabilities to withstand risks.
Article 24 Finance leasing companies may provide credit information services with and make inquiries about information relating to their finance leases in accordance with relevant regulations.
Article 25 Finance leasing companies and lessees shall fully agree on such matters as guarantee and insurance in connection with the finance leasing business so as to maintain the transaction security.
Chapter III Regulatory Indicators
Article 26 The proportion of finance leasing and other leasing assets of finance leasing companies shall not be lower than 60% of the total assets.
Article 27 The total amount of risk assets of finance leasing companies shall not exceed eight times of their net assets. The total amount of risk assets shall be determined by deduction of cash, bank deposits and treasury bonds from the enterprise's total assets.
Article 28 Fixed-income securities investment business undertaken by finance leasing companies shall not exceed 20% of their net assets.
Article 29 Finance leasing companies shall strengthen the management of key lessees, and control the proportion of business with a single lessee or with an affiliated party as the lessee to effectively prevent and spread business risks. Finance leasing companies shall comply with the following regulatory indicators:
(I) Concentration of financing to a single client. The balance amount of financing by a finance leasing company to a single lessee shall not exceed 30% of its net assets;
(II) Concentration of financing to a single group client. The balance amount of financing by a finance leasing company to a single group shall not exceed 50% of its net assets;
(III) Relevancy degree with a single client. The balance amount of financing by a finance leasing company to an affiliated party shall not exceed 30% of its net assets;
(IV)Relevancy degree of all affiliated parties. The balance amount of financing by a finance leasing company to all of its affiliated parties shall not exceed 50% of its net assets; and
(V) Relevancy degree with a single shareholder. The balance amount of financing to a single shareholder and all its affiliated parties shall not exceed the capital contribution amount made by the said shareholder in the finance leasing company, and shall also satisfy the provisions of these Measures on relevancy degree with a single client.
The CBIRC may adjust the aforesaid indicators in accordance with regulatory needs.
Chapter IV Supervision and Administration
Article 30 The CBIRC shall be responsible for the formulation of business operation and supervision and administration rules for finance leasing companies.
Article 31 The people's governments at the provincial level shall be responsible for formulating policies and measures to promote development of the finance leasing industry in their region, implement supervision and administration of finance leasing companies and deal with the risks of finance leasing companies. Local financial regulatory authorities at the provincial level shall be specifically responsible for the supervision and administration of finance leasing companies within their respective jurisdictions.
Article 32 Local financial regulatory authorities shall, according to the scale of operation, risk status, internal control management and other conditions of finance leasing companies, conduct classified regulation of finance leasing companies.
Article 33 Local financial regulatory authorities shall establish an off-site regulation system and use information systems to analyze and monitor finance leasing companies on schedule. Special attention shall be paid to companies with high relevant indicators and potential operational risks. Local financial regulatory authorities at the provincial level shall, prior to April 30 each year, report to the CBIRC the development of finance leasing companies within their respective jurisdictions and the regulation situation in the previous year.
Article 34 Local financial regulatory authorities shall establish an on-site inspection system, and their inspection of finance leasing companies shall include but do not limited to the following measures:
(I) Entering the finance leasing companies and other relevant places for on-site inspections;
(II) Inquiring the relevant entities or individuals and requiring them to make explanations on the relevant matters being inspected;
(III) Consulting and copying relevant documents and materials, and registering documents and materials that may be transferred, destroyed, concealed or tampered in advance for preservation;
(IV) Checking relevant information systems.
On-site inspection shall be approved by the person-in-charge of the local financial regulatory authorities. For on-site inspection, there shall be at least two inspectors who shall present their legitimate certificates and a notice of inspection. The relevant entities and individuals shall cooperate in supervision and inspection carried out by the local financial regulatory authorities pursuant to the law, provide the relevant information, documents and materials truthfully, and shall not refuse or hinder supervision and inspection or conceal information.
Article 35 Local financial regulatory authorities may hold regulatory talks with directors, supervisors and senior management of finance leasing companies, depending on its needs in performing its duties, and require them to give explanations on major matters concerning the business activities and risk management of finance leasing companies.
Article 36 Local financial regulatory authorities shall set up an early warning, prevention and disposal mechanism for major risk events of finance leasing companies, and formulate emergency plans for major risk events of finance leasing companies.
Upon occurrence of a major risk event, the finance leasing companies shall immediately take emergency measures and timely report the case to the local financial regulatory authorities, which shall then timely handle the case.
Article 37 Local financial regulatory authorities shall set up an information database on illegal operation of finance leasing business by finance leasing companies and their major shareholders, directors, supervisors and senior management, truthfully record the information on the relevant illegal acts, and where administrative penalties are imposed, such penalties shall be made public in accordance with the law.
Article 38 Finance leasing companies shall regularly submit information and materials to the local financial regulatory authorities and the branches of the People's Bank of China at the same level.
Article 39 Finance leasing companies shall establish a reporting system for major matters. Any of the following matters shall be reported to the local financial regulatory authorities within five working days of occurrence: major affiliated transactions, major pending litigations, arbitrations, and other major matters required to be reported by the local financial regulatory authorities.
Article 40 Local financial regulatory authorities shall, together with relevant departments, establish a coordination mechanism of supervision and administration and an information sharing mechanism, study and solve major problems of the finance leasing industry within their respective jurisdictions, strengthen the linkage of supervision and administration, and form a joint force of supervision and administration.
Article 41 Local financial regulatory authorities shall strengthen the development of regulation teams, and shall be equipped with full-time regulators according to regulatory requirements and duties. The number and capacity of full-time regulators shall match the number of regulated objects.
Article 42 The Financial Leasing Industry Association is a self-regulatory organization of the finance leasing industry and a social organization with the status of a legal person.
The Financial Leasing Industry Association established pursuant to the law shall, in accordance with its articles of association, optimize the role of communication and coordination and industry self-regulation, perform coordination, rights protection, self-regulation and service functions, conduct industry training, theoretical research, dispute resolution, etc., cooperate with the local financial regulatory authorities, and guide finance leasing companies in operating in good faith, fair competition and stable operation.
Article 43 Local financial regulatory authorities shall accurately examine the operation and risk status of finance leasing companies within their jurisdictions by means of cross-comparison of information, field visits and acceptance of petition letters and complaints, and divide them into three categories: normal operation, abnormal operation and operation in violation of laws and regulations.
Article 44 The category of normal operation refers to finance leasing companies that operate legally. Local financial regulatory authorities shall, according to the places where such companies are registered, review the business license, articles of association, list of shareholders, list of senior management and their curriculum vitae, audited balance sheets, income statements, cash flow statements for the past two years, and other documents required of finance leasing companies that fall under the category of normal operation.
For a company that is subject to and cooperates with the regulation of the CBIRC, has a place of business at the place of registration, and truthfully and completely fill in the information, the local financial regulatory authorities at the provincial level shall, upon the approval of the CBIRC, promptly include it in the regulation list.
Article 45 The category of abnormal operation mainly refers to "companies out of touch ", "Shell companies" and other finance leasing companies that operate abnormally.
"Companies out of touch " shall refer to finance leasing companies that meet any of the following conditions: they cannot be contacted; they cannot be found in the field investigation at the registered domicile of the companies; although the staff of the companies may be contacted, they neither know nor can contact the actual controllers of the companies; or they fail to submit regulatory information according to the regulatory requirements for three consecutive months.
"Shell companies" shall refer to finance leasing companies that meet any of the following conditions: they fail to submit and publicize the annual report for the previous year via the national enterprise credit information publicity system; the regulatory information shows that they have no business operation for the most recent six months; they have no tax payment record or "zero tax return" for the most recent six months; or they have no social insurance payment records for the most recent six months.
Local financial regulatory authorities shall urge the companies that fall under the category of abnormal operation to make corrections. An company that falls under the category of abnormal operation which passes correction acceptance inspection may be included in the regulation list; while an company which refuses correction or fails correction acceptance inspection shall be included in the list of abnormal operation, and such enterprise shall be advised to apply for change of enterprise name and scope of business and deregistration voluntarily.
Article 46 The category of operations in violation of laws and regulations refers to the finance leasing companies whose operations violate laws, regulations or these Measures. If the circumstances of violation of laws and regulations are minor and the enterprises pass the correction acceptance inspection, the enterprises may be included in the regulation list; if the enterprises fail to pass the correction acceptance inspection or the circumstances of violation of laws and regulations are serious, the local financial regulatory authorities shall legally punish and ban them, or coordinate with administrations for market regulation to legally revoke their business licenses; if they are suspected of committing a crime, they shall be promptly transferred to the public security authorities for investigation and punishment in accordance with the law.
Article 47 Local financial regulatory authorities at the provincial level shall establish a consultation mechanism with administrations for market regulation to strictly control the registration of finance leasing companies and their branches. The finance leasing company shall, in the event of change of company name, organization form, company address or business premises, registered capital, adjustment of equity structure, etc., fully communicate with the local financial regulatory authorities at the provincial level in advance to reach a consensus.
Chapter V Legal Liability
Article 48 Finance leasing companies which violate the provisions of laws and regulations and these Measures shall be punished pursuant to the penalty provisions stipulated in the relevant laws and regulations; where the relevant laws and regulations do not stipulate punishment, the local financial regulatory authorities may adopt regulatory measures such as holding regulatory talks, issuing warning letters, ordering them to make correction within a stipulated period, circulating notices of criticism, etc.; where the case constitutes a criminal offence, criminal liability shall be pursued in accordance with the law.
Article 49 Where finance leasing companies are punished in accordance with laws and regulations, the local financial regulatory authorities may, as the case may be, take regulatory measures such as circulating a notice of criticism, ordering them to make correction, and putting them on a warning list or a list of companies with illegal and dishonest conduct; if there are penalty provisions, they shall be punished in accordance with laws and regulations; where the case constitutes a criminal offence, criminal liability shall be pursued in accordance with the law.
Article 50 Finance leasing companies accepting deposits from the public directly or doing so in disguised forms or illegal fund-raising in any other form shall be punished in accordance with the laws, administrative regulations and relevant State provisions; where the case constitutes a criminal offence, criminal liability shall be pursued in accordance with the law.
Chapter VI Supplementary Provisions
Article 51 The people's governments at the provincial level shall formulate the implementing rules for the supervision and administration of finance leasing companies within their jurisdictions in accordance with these Measures, and shall, in light of the actual situation of supervision and administration, make appropriate adjustments to the scope of leased property and the requirements for the concentration and relevance of specific industries, and report the same to the CBIRC for record-filing.
Article 52 Finance leasing companies established prior to the implementation of these Measures shall meet the requirements hereof within the transition period specified by the local financial regulatory authorities at the provincial level, and such transition period shall not exceed three years in principle. Local financial regulatory authorities at the provincial level may appropriately extend the transitional arrangements according to the actual situation of specific industries.
Article 53 The following terms in these Measures shall have the following meanings:
(I) Affiliated parties may be identified in accordance with the Accounting Standards for Business Enterprises No. 36 – Disclosure of Affiliated Parties.
(II) A major affiliated transaction shall mean a single transaction between a finance leasing company and an affiliated party that accounts for 5% or more of the net assets of the finance leasing company, or a transaction between a finance leasing company and an affiliated party that, after the transaction between the finance leasing company and an affiliated party, has a transaction balance accounting for 10% or more of the net assets of the finance leasing companies.
Article 54 The CBIRC shall be responsible for interpretation of these Measures.
Article 55 These Measures shall come into effect as of the date of promulgation. Where there is any discrepancy between these Measures and the relevant provisions promulgated prior to implementation of these Measures, these Measures shall prevail.
