Article 1 With a view to regulating the dealings of derivative
products of banking institutions, effectively controlling the risk
of banking institutions in the transaction of derivative products,
the present Measures are formulated in accordance with Banking
Supervision Law of People's Republic of China and Commercial Bank
Law of People's Republic of China and other relevant laws and
regulations.

Article 2 The term of financial institutions as mentioned in the
present Measures refers to the banks, trust and investment
companies, finance companies, financial leasing companies, legal
person of auto financing companies and branches of foreign banks
established within the territory of People''s Republic of China
(hereinafter referred to as branches of foreign banks).
Article 3 The term of derivative products as mentioned in the
present Measures refers to a certain type of financing contract the
value of which subjects to one or more than one basic assets or
index. Basic types of these contracts are futures, transaction at
usance, swap transaction and futures rights. Derivative products
also including structural financial tools that have one or more
characteristic of futures, transaction at usance, swap transaction
and futures rights.
Article 4 The dealings of derivation products of financial
institutions referred to in the present Measures can be divided into
two categories as followed:
(1) The derivative product transactions for the purpose of making
profit or avoiding risk of their own capital and debt. The financial
institutions are regarded as the final customer of derivative
product.
(2) Financial institutions provide the derivative product
transactions to clients (including financial institutions).
Financial institutions are regarded as the broker of the derivative
product transactions and those brokers who provide quoting service
and negotiable service to other brokers and clients are regarded as
the market manipulators of derivative products.
Article 5 China Banking Regulating Commission (hereinafter referred
as to CBRC) shall be responsible for supervision over the derivative
product transactions of financial institutions. Financial
institutions shall pass the examination and approval of CBRC and
accept the supervising and administration of CBRC in operating the
derivative product transactions.
　　Any non-financial entity shall not provide the dealing services of
derivative product to the clients.
Article 6 Financial institutions shall observe the provisions on
foreign exchange and other relevant provisions in operating the
derivative product transactions related with the foreign exchange,
stocks and commodities and derivative product transactions on
exchange.
Chapter II Administration of Market Access
Article 7 Financial institutions that apply for the operation of the
derivative product transactions shall meet the following
requirements
(1) Having a perfect risk control system and internal controlling
system of the derivative product transactions;
(2) Having a operating system of auto-connection of the derivative
product transactions and real-time risk control system;
(3) Operating staff of the derivative product transactions shall has
an experience of directly operating the derivative product
transactions and risk control for more than 5 years, and shall not
have any defective record;
(4) Having at least 2 operating staff that has over 2 years
experience of the derivative product transactions and related
derivative product transactions and over half a year experience of
special training of operating skill of the derivative product
transactions, 1 executive of risk control, 1 staff for risk model
research or analyses. The mentioned staff shall be sole duty person
and shall not hold a concurrent post or have any defective record;
(5) Having appropriate trading floor and equipment;
(6) If the branches of foreign banks plan to run the derivative
product transactions, the registered country shall have a legal
system of supervising and regulating the derivative product
transactions and the competent authority of the country shall have
the capability of supervising and regulating;
(7) Other requirements of CBRC.
　　The branches of foreign banks plans to run the derivative product
transactions that can not meet the requirements of Item 1 to Item 5
shall conforms with Item 6, Item 7 of the preceding Paragraph and
following requirements:
(1) Having formal authorization concerning type and quota of the
derivative product transactions and other matters from its
headquarter,
(2) Except definite provisions of its headquarter, all the
derivative product transactions of the branches shall be operated
through the real-time system of the authorized headquarter, and the
inventory adjusting, risk exposure operation and risk control shall
be operated by the headquarter.
Article 8 The Policy banks, Chinese-funded commercial banks (except
the city commercial banks, rural commercial banks and rural
cooperative banks), trust and investment banks, finance companies,
finance leasing companies, auto-financing companies shall, if they
operate transactions of derivative products, apply for certificate
from CBRC by their legal representatives and be examined and
approved by CBRC.
　　City commercial banks, rural commercial banks and rural
cooperative banks shall, if they operate transactions of derivative
products, submit the application materials to the local Banking
Regulatory Bureau by their legal representatives and shall be
examined and approved by CBRC after the approval of local
departments.
　　Foreign-funded financial institutions shall, if they operate the
transactions of derivative products, submit application materials
signed by the authorized signer to the local Banking Regulatory
Bureau and shall be examined and approved by CBRC after the approval
of local departments. Foreign-funded bank institutions that plan to
operate the derivative product transactions in more than two
branches in the territory of China may submit the application
materials to the local Banking Regulatory Bureau by their
headquarters or the main reporting bank of the foreign bank and
shall be examined and approved by CBRC after the approval of local
departments.
Article 9 Where financial institutions apply for the operation of
the derivative product transactions, they shall submit the following
documents and materials in triplicate to CBRC or its agencies,
(1) Application report, feasibility report, operation program or the
derivative product transactions acquisition plan;
(2) Internal executive regulation of the derivative product
transactions;
(3) Accounting system of the derivative product transactions;
(4) List and resume of the governor and main derivative product
transactions staff;
(5) Authorized administrative system of risk exposure qualification
or limitation;
(6) Security testing report of trading floor, equipment and system;
(7) Other documents and materials required by CBRC.
　　Branches of foreign banks operating the derivative product
transactions that do not satisfy criteria listed in Item 1 to Item 5
of Article 7 shall submit following documents to the local Banking
Regulatory Bureau at the time of application,
(1) Documents of formal written authorization from the headquarter
to the branches of operating the derivative product transactions,
(2) Promising letter from the headquarter of insuring the real-time
derivative product transactions of all the derivative product
transactions of its branches through the system of the headquarters
and taking charge of inventory adjusting, risk exposure operation
and risk control.
Article 10 Internal executive regulations of the financial
institutions that operate the derivative product transactions shall
essentially involve following contents,
(1) Rudder, operational procedure that shall reflect the principle
of separation of pre-phase, middle-phase and after-phase, emergency
solution of the derivative product transactions;
(2) Risk model index and qualification operation index;
(3) Type of derivative product transactions and correspondent risk
control system;
(4) Risk report and internal audit system;
(5) Executive and evaluation system of research and development of
the derivative product transactions;
(6) Rules of brokers;
(7) Job responsibility system of derivative product transactions
governors and questioning mechanism and prompting and restricting
mechanism of the governor at all level and traders;
(8) Training program for the persons-in-charge and workers;
(9) Other contents required by CBRC.
Article 11 CBRC shall give response within 60 days after the
reception of all application materials submitted by the financial
institutions according to the present Measures.
Article 12 Legal person in the territory of China shall strictly
examine the capability of risk control of its agencies in
authorizing them to operate the derivative product transactions and
make formal written documents of authorization concerning type of
derivative product transactions and limitation. The agencies shall
operate the derivative product transactions unifiedly through their
headquarters'' real-time system, and their headquarters shall run
inventory adjusting, risk exposure operation and risk control as a
whole.
　　The aforesaid agencies shall report to the local Banking
Regulatory Bureau within 30 days after the receipt of authorization
or authorization-altering documents from headquarter with aforesaid
documents.
Chapter III Risk Management
Article 13 Financial institutions shall, according to its own
characteristic of operating target, assets scale, managing ability
and risk of the derivative product transactions, make sure the
capability of running the derivative product transactions and
confirm the type and scale of the derivative product transactions.
Article 14 Financial institutions shall, according to the
classification of Article 4, set up the sound systems of risk
control, internal control and operation corresponding to the type,
scale and complexity of the operating derivative product
transactions.
Article 15 Higher executives of financial institutions shall know
the risk of the derivative product transactions, comprehensive
management framework involving principles, procedure, organization
and power limitation of auditing, approving and evaluating the
operation and risk control of the derivative product transactions
and shall be capable of acquiring information on the derivative
product transactions through independent risk control departments
and sound examining and reporting system and giving corresponding
supervision and guidance.
Article 16 Higher executives of the financial institutions shall
decide the calculating method and index of risk exposure of the
derivative product transactions that is adaptive to the operation of
their institutions, and shall make, regularly checkup and update the
system of risk exposure limit, loss limit and emergency solution
according to the comprehensive ability, owned assets, profitability,
operation policy and estimation of market. Higher executive also
shall make supervision and control procedure of limitations. Higher
executives of the financial institutions in charge of operating the
derivative product transactions and of risk control shall be divided
separately.
Article 17 Financial institutions shall make clear criteria of
working certificate of traders, analyzers and other staff and
arrange training for the salesman and other operating staff
according to the complexity of the derivative product transactions
so as to ensure they have efficient skill and competency.
Article 18 Financial institutions shall make sound policy of
evaluating the other party of the derivative product transactions,
including whether the other party thoroughly understand the contract
and the responsibility of perform it, whether the derivative product
transactions meet the real target of the other party and the
evaluation of credit risk of the other party.
　　Financial institutions shall make special provisions on the
qualification of the other party under the circumstance of high-risk
derivative product transactions type.
　　Financial institutions may reasonably rely on the formal written
documents provided by the other party according to the principle of
good faith in performing the present Article.
Article 19 Financial institution shall explain the risk of the
derivative product transactions to the institution or individual in
operating the derivative product transactions for them and shall get
the confirmation letter from them so as to confirm that they have
understand and have the ability to bear the risk.
　　The information exposed to the institution or individual by the
banking institution shall at least involve following contents,
(1) Content and risk summary of the contract on the derivative
product transactions,
(2) Important factors influencing potential loss of the derivative
product.
Article 20 Financial institutions shall appropriately and reasonably
use all kinds of risk buffer measures like guarantee to reduce the
credit risk of the other party of the derivative product
transactions, evaluate the credit risk by using appropriate method
and model and apply corresponding risk control measures.
Article 21 Financial institutions shall evaluate market risk of the
derivative product transactions by using appropriate evaluation
method or model, handle the market risk according to the price
principles, and adjust the operation scale, type and risk exposure
level.
Article 22 Financial institutions shall make sound fluidity
arrangements according to the scale and type of the derivative
product transactions in order to ensure the sufficient performing
ability under the unusual market circumstances.
Article 23 Financial institutions shall establish and amplify sound
systems and mechanisms of operating risk control so as to strictly
control the derivative product transactions risk.
Article 24 Financial institutions shall establish and amplify sound
systems and mechanisms of legal risk control so as to strictly
examine the transacting qualification and legal status. Financial
institutions shall, in signing the contract of the derivative
product transactions consult, refer to the legal documents world
widely adapted, thoroughly consider factors like feasibility of
demanding and saving from damage on account of breaking a contract
by using legal measures and take effective means to prevent legal
risk in drafting out transactions contract, negotiating and
concluding, etc.
Article 25 Financial institutions shall submit accounting statement,
statistic statement and other related reports of the derivative
product transactions to CBRC according to the provisions promulgated
by CBRC.
　　Financial institutions shall disclose risk situation, loss
situation, profit change and other unusual situation of the
derivative product transactions according to the provisions on
information exposing promulgated by CBRC.
Article 26 CBRC have the privilege of inspecting materials and
statements of the derivative product transactions from financial
institutions at any time and of inspecting regularly whether the
risk control system, internal control system and operation system of
the financial institutions adapt the type of derivative product
transactions they operate.
Article 27 Financial institutions shall timely and actively report
to CBRC and submit corresponding solution under the circumstance of
existing big operation risk or tremendous loss in running the
derivative product transactions.
　　Financial institutions shall timely and actively report detailed
information to CBRC under the circumstance of important change of
operation, executive system or risk control of the derivative
product transactions.
　　Financial institutions shall simultaneously send a copy to the
State Administration of Foreign Exchange in the case that the
aforesaid matters related to the foreign exchange administration and
external payment.
Article 28 Financial institutions shall properly conserve all the
operation documents and documents, accounting books, original
evidences, telephone record and other materials of the derivative
product transactions. Telephone record shall be conserved for more
than half one year, and other materials shall be reserved for 3
years after the maturity of the contract for the purpose of
examination. The special provisions of accounting prevail.
Chapter IV Penalty Provisions
Article 29 Where the traders of the derivative product transactions
in the financial institutions violate these Measures or relevant
provisions of the institution resulting in heavy economic losses to
the institution or the clients, financial institutions thereof shall
give the directly responsible higher executives and other governor
and directly liable persons the penalty of demerit to expel. Those
who violate the Criminal law shall be transmitted to judiciary
departments to investigate and affix criminal responsibility.
Article 30 Financial institutions that operate the derivative
product transactions without permission of CBRC shall be given
penalty by CBRC according to Measures on Punishing Illegal Activity
in Financing.
　　Non-financing institutions that violate these Measures and provide
service of the derivative product transactions to the clients shall
be clamped down by CBRC and the illegal profit shall be confiscated
by CBRC. Those violate criminal law shall be transmitted to
judiciary departments to investigate and affix criminal
responsibility.
Article 31 CBRC shall respectively give penalty to the financial
institutions that do not submit relevant statements, materials or
that do not expose related information according to the character of
the institutions and Banking Supervision Law of People''s Republic
of China, Commercial Bank Law of People''s Republic of China,
Regulations on Administration of Foreign-funded Financial
institutions of People''s Republic of China and other relevant laws,
regulations and financial regulations.
　　CBRC shall give penalty to the financial institutions that provide
fake information of the derivative product transactions or disguise
important information of the derivative product transactions
according to Measures on Punishing Illegal Activity in Financing.

Article 32 CBRC can suspend or revoke the qualification of operating
the derivative product transactions of the financial institutions
under the circumstance of finding the institutions did not
effectively execute essential risk management and internal
management system of the derivative product transactions.

Chapter V Supplementary Provisions

Article 33 The power to interpret the present Measures shall remain
with CBRC.

Article 34 The present Measures shall enter into effect as of March
1, 2004. If any provisions governing the derivative product
transactions of financial institutions issued previously are in
conflict with the present Measures, the present Measures shall
prevail