Index number:000014453-2017-00196 Dispatch date: 2017/02/27
Publish organization: State Administration of Foreign Exchange Reference number: Huifa No.5[2017]
Name: Circular of the State Administration of Foreign Exchange on Foreign Exchange Risk Management for Foreign Institutional Investors in the Interbank Bond Market


Circular of the State Administration of Foreign Exchange on Foreign Exchange Risk Management for Foreign Institutional Investors in the Interbank Bond Market

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 of the SAFE in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo, and national Chinese-funded banks:

To boost the opening up of the foreign exchange market and facilitate management of foreign exchange risks by foreign institutional investors (foreign investors) in the interbank bond market, we hereby provide notification of the issues related to foreign institutional investors' participation in China's foreign exchange market as follows, in accordance with the Regulations of the People's Republic of China on Foreign Exchange Administration and relevant provisions:

I. Domestic financial institutions with the qualification approved by the SAFE for derivatives business of RMB against foreign exchange for customers (foreign exchange derivatives business), and meeting the conditions for settlement agents in the interbank market (settlement agent) set out in the Announcement No. 3 of the People's Bank of China [2016] are allowed to handle the foreign exchange derivatives business for foreign institutional investors that entrust the institution with providing agent transactions and settlement services.

The foreign investors hereunder refer to the foreign investors defined by the Announcement No. 3 of the People's Bank of China [2016].

II. Settlement agents are required to observe the principle of transaction for actual requirements in handling foreign exchange derivatives business for foreign investors.

The foreign exchange derivatives business for foreign investors is designed only to hedge against the foreign exchange risk exposure arising from the investment with the inward remittances in the interbank bond market. The foreign exchange derivative exposure and the foreign exchange risk exposure as the transaction basis under bond investment shall be properly related. Where the foreign exchange risk exposure varies with the changes in investments in the interbank bond market, foreign investors shall adjust the exposure of foreign exchange derivatives they hold in five working days, ensuring the alignment with the principle of transaction for actual requirements.

III. The foreign exchange derivatives handled by a settlement agent for foreign investors shall include forward derivatives, foreign exchange swaps, currency swaps and options as laid out in the Detailed Rules for the Implementation of the Administration Measures for Foreign Exchange Settlement and Sales by Banks (Huifa No. 53 [2014]).

Based on the real and reasonable needs for foreign exchange risk management, a settlement agent could flexibly provide transaction mechanisms including reverse position closing, balance settlement or gross settlement for the foreign exchange derivatives business of foreign investors. For the currencies and reference settlement prices for reverse position closing and balance settlement, please refer to the Detailed Rules for the Implementation of the Administration Measures for Foreign Exchange Settlement and Sales by Banks (Huifa No. 53 [2014]).

IV. The foreign exchange receipts and payments involved in the foreign exchange derivatives business carried out by foreign investors shall be handled in the special foreign exchange account as specified in the Circular of the State Administration of Foreign Exchange on Foreign Exchange Administration for the Investments of Foreign Institutional Investors in the Interbank Bond Market (Huifa No. 12 [2016]).

V. Any settlement agent shall, when handling the foreign exchange derivatives business for foreign investors, comply with the provisions on the management of synthetic positions in the foreign exchange settlement and sales and is obligated to prepare the statistical reports for foreign exchange settlement and sales in accordance with the Circular of the State Administration of Foreign Exchange on Issuing the Statistical System for the Bank's Foreign Exchange Settlement and Sales (Huifa No. 42 [2006]), the Circular of the General Affairs Department of the State Administration of Foreign Exchange on Adjusting the Statistical Statements for Synthetic Position of the BanksForeign Exchange Settlement and Sales and Submission Methods (Huizongfa No. 129 [2012]), and the Circular of the General Affairs Department of the State Administration of Foreign Exchange on Adjusting the Statistical Statements for the BanksForeign Exchange Settlement and Sales (Huizongfa No. 4 [2017]).

VI. This Circular shall come into force as of the date of release. In case of any inconsistency between the former provisions on the management of foreign exchange derivatives business handled by banks for their customers and this Circular, this Circular shall prevail.

Upon receipt, the branches and foreign exchange administrative departments of the SAFE shall timely forward it to the relevant financial institutions within their respective jurisdictions.

Please follow the Circular in your implementation.

State Administration of Foreign Exchange

February 24, 2017




相关信息:
                 
State Administration of Foreign Exchange
Addess:Huarong Plaza, No.18 in Fucheng Road, Haidian District, Beijing
Postcode:100048 Informants'hot-line telephone:+86-10-68402265