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Rules and Regulations
  • Index number:
  • Dispatch date:
    2011-01-30
  • Publish organization:
    State Administration of Foreign Exchange
  • Exchange Reference number:
  • Name:
    Circular of the SAFE on Relevant Issues Concerning Foreign Exchange Administration for Renminbi-Against-Forex Currency Swaps Provided by Designated Foreign Exchange Banks to Their Clients
Circular of the SAFE on Relevant Issues Concerning Foreign Exchange Administration for Renminbi-Against-Forex Currency Swaps Provided by Designated Foreign Exchange Banks to Their Clients

The branches and foreign exchange administrative departments of the State Administration of Foreign Exchange (SAFE) in all provinces, autonomous regions, and municipalities directly under the Central Government; the branches in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo; and all designated foreign exchange banks:

In order to further satisfy the requirements of domestic economic entities to hedge exchange-rate risks, the relevant issues with regard to foreign exchange administration for Renminbi-against-forex currency swaps (hereinafter referred to as the currency swap) provided by the designated foreign exchange banks (hereinafter referred to as the banks) to their clients are hereby notified as follows:

1. The currency swap stated in the Circular refers to a trading agreement by which both parties of the agreement exchange agreed-upon quantities of Renminbi and principal in a foreign currency within a prescribed term, in parallel with the regular exchange of interest of the two currencies.

The principal is exchanged in the forms of: (1) the exchange of the principal in Renminbi and the foreign currency by both parties as per the agreed-upon exchange rate on the date when the agreement becomes effective, and the reverse exchange of the principal based on the same exchange rate and quantity on the date when the agreement expires; (2) other forms as prescribed by the Peoples Bank of China and the SAFE.

Interest exchange means that one party in question pays the other party in question the amount of interest computed based on the swap-in currency on a regular basis; the interest can be computed either based on a fixed rate or on  a floating rate.

2. Any bank that has acquired a one-year qualification to operate Renminbi-against-forex swaps can directly launch currency swaps for its clients. The branches of banks (branches of foreign commercial banks are deemed to be legal persons) can launch currency swaps to their clients after being authorized by their legal persons thereof.

3. The transaction elements such as currencies and terms involved in the currency swaps provided by the banks to their clients are determined by discretion of the banks.

The interest rate involved in the currency swaps shall be determined by both parties in question through negotiations, but it shall comply with the regulations of the Peoples Bank of China on the administration of deposit and lending rates. The banksinterest rate of the swap-in (or swap-out) currency shall not exceed the upper (or lower) limit of the benchmark deposit (or lending) rate publicized by the Peoples Bank of China .

4. The banks shall comply with the relevant provisions on foreign exchange administration and the statistical requirements with regard to the foreign exchange swap business as specified in the documents including the Circular of the State Administration of Foreign Exchange on Relevant Issues Concerning Foreign Exchange Administration for Forward Settlement and Sales of Foreign Exchange and Renminbi-Against-Forex Swaps Provided by Designated Foreign Exchange Banks to Their Clients (Hui Fa [2006] No. 52), the Circular of the State Administration of Foreign Exchange on the Distribution of the Statistical Rules for Foreign Exchange Settlement and Sales by Banks (Hui Fa [2006] No. 42), etc.

The banks shall submit on a monthly basis a report on the interest rate of the Renminbi involved in the currency swaps. See Appendices 1 and 2 for details.

5. In operating the currency swaps, the banks shall incorporate the interest in foreign currencies earned from their clients into the foreign exchange earnings thereof for centralized management, and shall not separately carry out foreign exchange settlement.

6. In the event that the banks deal with currency swaps in violation of the Circular, the SAFE shall impose penalties thereupon in accordance with the Regulations of the Peoples Republic of China on Foreign Exchange Administration and the relevant laws and regulations.

VIII. This Circular shall enter into force as of March 1, 2011.

The branches and foreign exchange administration departments of the SAFE shall, upon receipt of this Circular, forward it immediately to urban commercial banks, rural commercial banks, rural cooperative banks, and foreign-funded banks within their jurisdictions. For any problems arising from implementation, please contact the Department of the Balance of Payments of the SAFE. The telephone numbers are: 010-68402304, 68402313.

                                                                             January 19, 2011


affix1:
Statistical Form for Renminbi Interest Rates in Currency Swaps Provided by (the name of the bank) to Clients
affix2:
Instructions for Completing the Statistical Form on Renminbi Interest Rates in Currency Swaps Provided by Banks to their Clients





The English translation may only be used as a reference. In case a different interpretation of the translated information contained in this website arises, the original Chinese shall prevail.

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