These rules are formulated in accordance with laws and regulations including Commercial Banking Law of the People's Republic of China, Regulations of the People's Republic of China on Administration of Foreign-funded Financial Institutions, so as to standardize RMB inter-bank transactions and protect the lawful rights of the parties involved in inter-bank transactions.

Article 2

RMB Inter-bank transactions defined in these rules refer to RMB borrowing and lending business conducted by commercial banks established within the territory of the People's Republic of China.

Article 3

Commercial banks defined in these rules refer to the Chinese commercial banks and their authorized branch offices; wholly foreign-funded banks, foreign bank branches and sino-foreign joint-equity banks engaged in RMB business as approved by the People's Bank of China. Commercial banks shall report to the local branch offices of the People's Bank of China for record-keeping when authorizing their branches to deal in RMB inter-bank transactions. These rules shall apply to RMB inter-bank transactions by urban and rural credit cooperatives, but not to transactions among different branch offices within a commercial bank.

Article 4

Maturity of RMB inter-bank transactions shall be no less than four months and no more than three years (inclusive), and an extension may be allowed for a period of not more than half of the original maturity.

Article 5

Interest rate as well as calculation and payment of interests in RMB inter-bank transactions shall be negotiated and determined by the borrowing and lending parties, and the lending party shall have the right to charge the borrowing party a commitment fee, apart from the interest, in certain proportion to the transaction value. The payment of such a commitment fee shall be negotiated and agreed by both parties.

Article 6

Balance of RMB inter-bank transactions shall be subject to limits stipulated by the commercial banks' asset liability ratio management system. In specific, the borrowing balance of a commercial bank at the end of the month shall be no more than 40 percent of its total RMB liability at the end of the same month. If the specified ratio is exceeded at the date when these rules are officially issued, the concerned commercial bank shall gradually bring down this ratio to no more than 40% before December 31, 2006; if not, the specified ratio shall stand as the limit not to be exceeded. When assessing the ratio of deposits to loans in a commercial bank, the People's Bank of China shall include loan balance produced with borrowed funds from RMB inter-bank transactions into the outstanding loan balance of the commercial bank while at the same time making the balance of borrowed funds part of the outstanding deposit balance.

Article 7

Use of funds borrowed through RMB inter-bank transactions shall be specified by both parties in the transaction contract in line with relevant state industrial policies and rules laid by the People's Bank of China.

Article 8

Commercial banks shall strengthen risk management on RMB inter-bank transactions referring to credit authorization management applied to industrial and commercial enterprises.

Article 9

Information of RMB inter-bank transactions including the contract value, withdrawal (repayment), maturity and interest rate shall be recorded into the electronic database of the National Inter-bank Transactions Center within 3 days after the contract is signed and each withdrawal or repayment is effected.

Article 10

Chinese commercial banks involved in RMB inter-bank transactions shall establish corresponding items like "inter-bank borrowing" and "inter-bank lending" in their accounting charter with a view to facilitating assessment of the balance of RMB inter-bank transactions specified in these rules. Establishment of such accounting items by wholly foreign-funded banks, foreign bank branches and Sino-foreign joint-equity banks shall be reported to the branch offices of the People's Bank of China where they are located for record-keeping.

Article 11

The lending party in a RMB inter-bank transaction may have the right to charge penalty interest on overdue loans which the borrowing party has failed to repay on time in accordance with relevant rules laid by the People's Bank of China, and shall sign it into the transaction contract.

Article 12

Financial and operational information provided for each other by both parties in RMB inter-bank transactions shall be kept confidential and not be disclosed to the third party by any one side without agreement of the other side, except otherwise stipulated by laws and regulations.

Article 13

When one or both parties in RMB inter-bank transactions are found involved in any of the following activities, the People's Bank of China may issue penalties in the form of warning and a fine of no more than RMB30 thousand yuan in light of the severity of the misconduct:

• Setting borrowing maturity in violation of these rules;
• Over borrowing in excess of the prescribed ratio;
• Not establishing items like "inter-bank borrowing" and "inter-bank lending" in accounting charter and recording the balance of RMB inter-bank transactions in other accounts;
• Relevant information is not recorded into the electronic database of National Inter-bank Transactions Center or the information recorded is untrue;
• Other irregularities detected by the People's Bank of China.

Article 14

Branch offices of the People's Bank of China shall carry out routine inspection on RMB inter-bank transactions

Article 15

These rules are subject to the interpretation of the People's Bank of China.