Beijing, September 9, 2024
The China National Financial Regulatory Administration has recently issued a revised version of the Management Measures for Criminal Cases Involving Financial Institutions, marking a significant step in the country’s ongoing efforts to combat financial crimes and maintain financial stability. The new regulations, announced last Friday, are seen as a crucial move to implement the spirit of the Central Financial Work Conference and provide financial institutions with new tools to tackle criminal activities effectively.
Comprehensive Coverage of Financial Institutions
The revised Management Measures encompass a wide range of financial entities operating within China. According to Article 2 of the regulations, the term financial institutions includes financial holding companies, policy banks, commercial banks, rural cooperative banks, rural credit cooperatives, rural mutual aid funds, loan companies, financial asset management companies, corporate finance companies, financial leasing companies, auto finance companies, consumer finance companies, currency brokerage firms, trust companies, wealth management companies, financial asset investment companies, life insurance companies, property insurance companies, insurance asset management companies, insurance groups (holding companies), reinsurance companies, policy insurance companies, mutual insurance organizations, insurance professional agencies, and insurance brokers.
The regulations also extend to foreign bank representative offices, foreign insurance institutions, and other entities supervised by the National Financial Regulatory Administration and its regional branches.
Defining ‘Major Cases’ and Risk Exposure Thresholds
One of the key highlights of the new regulations is the clarification of what constitutes a major case in the context of financial institutions. Article 10 of the Management Measures outlines the criteria for major cases, including:
- Cases where the amount of business involved is equivalent to or exceeds 100 million yuan.
- Cases where the risk exposure amount (the amount of the case minus the cash or cash-equivalent assets recovered) reaches or exceeds 50 million yuan and accounts for 10% or more of the net assets of the institution.
- Cases that are severely malicious in nature, trigger significant negative public opinion, cause bank runs or mass policy surrenders, or potentially lead to regional or systemic risks.
The inclusion of a risk exposure threshold of 50 million yuan is particularly noteworthy, as it helps financial institutions and large financial holding companies to accurately identify and assess risks, thereby enhancing the effectiveness of case management.
Establishing Institutional Responsibility
The new regulations also emphasize the primary responsibility of financial institutions in handling cases. Article 20 of the Management Measures outlines seven key responsibilities that financial institutions must assume:
- Reporting cases and case risk events in accordance with regulations.
- Conducting investigations into the case and submitting investigation reports.
- Identifying and holding responsible the personnel involved in the case.
- Identifying and addressing internal management vulnerabilities.
- Reporting major cases with significant social impact to local governments in a timely manner.
- Submitting case closure reports as required.
- Informing and conducting warnings for all staff in the event of major cases.
The regulations provide a template for the Case Risk Event Report that financial institutions should submit, which includes details such as the name of the institution, an overview of the case or risk event, changes in personnel and risk situations, measures taken by authorities, and other relevant information.
Conclusion
The revised Management Measures for Criminal Cases Involving Financial Institutions provide financial institutions with a clear behavior manual for handling cases, detailing how to report case risks and manage responsibilities. This not only offers a clear management framework for institutions but also lays a solid foundation for maintaining stability and security in the financial market.
The new regulations are a testament to China’s unwavering commitment to combating financial crimes and safeguarding the integrity of its financial system. As financial markets continue to evolve, these measures ensure that institutions are well-equipped to handle criminal cases effectively and protect the interests of both consumers and the broader economy.
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