In order to improve administration of the bankssynthetic positions in foreign exchange settlement and sales and to facilitate the conduct of the relevant business by banks, the State Administration of Foreign Exchange (SAFE) recently promulgated the Circular on Relevant Issues concerning the Administration of the BanksSynthetic Positions in Foreign Exchange Settlement and Sales (Huifa No. 56 [2010]) (hereinafter referred to as the Circular). The circular shall come into force as of the date of promulgation.

This Circular collates and integrates the 7 normative documents pertaining to the administration of bankssynthetic positions in foreign exchange settlement and saleshereinafter referred to as the positions . In the Circular, the principles for the administration of the positions are defined, including unified ratification of legal persons, limited management, management on an accrual basis, examination and regulation on a daily basis, and regular reconciliation against the accounting subjects; specific management requirements for the positions have also been further clarified concerning the position application, adjustment, and ratification, as well as the submission of the relevant data on the positions; moreover,  the management requirements have been integrated with regard to application of balance controls in the special RMB accounts for foreign exchange settlement and sales to foreign-funded banks which have not opened RMB business, and in the centralized management of the positions of the branches of foreign banks. As of the date of issuance, the limits of the banks existing position remain unchanged.

The Circular will play an active role in improving the transparency of laws and regulations on the administration of foreign exchange and simplifying management processes, thus enabling banks to better understand and implement the relevant regulations. As a result, the foreign exchange settlement and sales business and the relevant business activities will be carried out in an orderly manner.