PBoC: Intend to promote nationwide the pilot policy of integrating high version local and foreign currency fund pools that have been relatively mature in the pilot phase.

On April 1st, the People's Bank of China issued a notice on the draft of the "Regulations on the Management of Cross-Border Corporate Local and Foreign Currency Integrated Cash Pooling Business." The notice aims to expand the pilot policy of high-version local and foreign currency integrated cash pools to the whole country, with the main content including establishing a policy framework for local and foreign currency integrated cash pools, implementing macro-prudential management of cross-border fund flows, and enhancing management and supervision. Specifically, the notice aims to bring the local and foreign currency cash pool business under a unified policy framework to facilitate fund transfers and usage, as well as encourage the use of local currency for cash pool operations. In terms of operations, local branches of the foreign exchange bureaus will serve as a "one-stop window" for enterprises, streamlining the process of registration and changes to reduce operational costs for businesses. The drafting of the notice is aimed at promoting the pilot of local and foreign currency integrated cash pools to better facilitate the coordinated use of cross-border funds by enterprises and was done by the People's Bank of China, together with the State Administration of Foreign Exchange. The pilot policy will be implemented nationwide, with the main points including establishing a policy framework for local and foreign currency integrated cash pools, implementing macro-prudential management of cross-border fund flows, and strengthening real-time and post-event supervision. The notice also takes into account the various versions of existing cash pools and the issue of separate local and foreign currency management, aiming to streamline operations and encourage the use of local currency for cash pool activities. The notice was drafted after extensive consultation with enterprises, bank representatives, and branch offices, and feedback from stakeholders was incorporated into the final version. The People's Bank of China and the State Administration of Foreign Exchange have issued the draft notice on the regulations for cross-border corporate local and foreign currency integrated cash pool operations, with instructions for implementation.Integrated fund pool business, in accordance with the "People's Republic of China People's Bank of China Law" and "People's Republic of China Foreign Exchange Management Regulations" and relevant laws and regulations, formulate these provisions.Article 2: The multinational company referred to in these regulations refers to a consortium formed by the parent company, subsidiaries, and other member companies or institutions, with capital as the link. The sponsoring company refers to a domestic member company with independent legal personality that is authorized by the multinational company to carry out main business filing, implementation, data reporting, feedback, and other responsibilities. If the sponsoring company is a financial company, it should comply with the regulations of the industry management department regarding cross-border fund transactions. Member companies refer to various domestic and foreign companies with direct or indirect shareholding within the multinational company that have independent legal personality. Branches and brother companies under the same parent company control as the sponsoring company, even if they do not have direct or indirect shareholding, can be considered as member companies. Financial institutions (excluding financial companies acting as sponsoring companies), local government financing platform companies, and real estate companies are not allowed to participate in the multinational company's domestic and foreign currency integrated fund pool business as sponsoring companies or member companies. Article 3: The domestic and foreign currency integrated fund pool business of multinational companies referred to in these regulations (hereinafter referred to as the fund pool business) refers to the multinational company's centralized operation and management of domestic and foreign currency funds for fund aggregation and redistribution, central collection and payment of current project funds, and net settlement of offset amounts. Article 4: Multinational companies can choose one or more banks within the jurisdiction of the provincial foreign exchange bureau where the sponsoring company is located as cooperative banks (hereinafter referred to as cooperative banks) to conduct fund pool business. Chapter 2 Business Filing and Changes Article 5: Multinational companies that meet the following conditions can choose a domestic member company as the sponsoring company to centrally operate and manage the funds of domestic and foreign member companies and conduct fund pool business based on operational needs: (1) Have genuine business needs; (2) Have a sound cross-border fund management framework and internal control system; (3) Establish corresponding internal management electronic systems; (4) The total amount of international revenue and expenditure in domestic and foreign member companies in the previous year is not less than RMB 7 billion, the total operating income of all domestic member companies in the previous year is not less than RMB 10 billion, and the total operating income of all foreign member companies in the previous year is not less than RMB 2 billion; (5) No significant violations of cross-border settlement transactions in the past two years (for companies less than two years old, no significant violations of cross-border settlement transactions since their establishment); (6) If the sponsoring company and other member companies are listed in the trade foreign exchange income and expenditure directory, the classification of goods trade for the sponsoring company should be Class A. If the goods trade classification for the sponsoring company falls to Class B or C, the foreign exchange bureau of the location will notify the multinational company to change the sponsoring company and resubmit the application materials; if the goods trade classification for other member companies falls to Class B or C, the sponsoring company should terminate its business and follow the procedures in Article 9 and Article 10 for member company changes; (7) The total number of domestic and foreign member companies should not be less than 3. If foreign member companies are set up by domestic companies, they should comply with relevant domestic regulations on overseas investments; (8) Other prudent regulatory conditions stipulated by the People's Bank of China and the State Administration of Foreign Exchange. Article 6: Banks with international settlement capabilities and qualifications for foreign exchange transactions can serve as cooperative banks for multinational companies to conduct fund pool business and must meet the following conditions: (1) The bank has been assessed as category B or above for compliance and prudent operation in foreign exchange business in the past two years; (2) There have been no significant violations of cross-border settlement transactions and foreign exchange transactions in the past two years; (3) The bank has sound anti-money laundering internal control systems and measures, and has no significant deficiencies in fulfilling anti-money laundering obligations that have not been rectified; (4) Other prudent regulatory conditions stipulated by the People's Bank of China and the State Administration of Foreign Exchange. If a cooperative bank fails to meet the above conditions in its ongoing operations, it can only carry out various types of business that have been filed for existing fund pool clients and cannot add new business categories or new fund pool clients for the original fund pool client. Article 7: Multinational companies conducting fund pool business should apply for registration and filing through the provincial foreign exchange bureau under the jurisdiction of the sponsoring company's location to the foreign exchange bureaus under the jurisdiction of the provincial foreign exchange bureau. The application materials can be submitted by the sponsoring company as the applicant, or can be submitted by the sponsoring company as the applicant entrusting a cooperative bank to submit on its behalf, including: (1) Basic materials: 1. Application form (including basic information of the multinational company and the sponsoring company, types of business to be conducted, total amount of international revenue and expenditure in the previous year, total operating income of all domestic and foreign member companies in the previous year, recent two-year violations of cross-border settlement transactions, list of member companies, shareholding structure of the sponsoring company and member companies, classification of goods trade enterprises, compliance of overseas investment by foreign member companies set up by domestic companies, information on cooperative banks chosen, cross-border fund management framework, internal control management, and system construction, etc.); 2. Authorization letter from the multinational company to the sponsoring company to conduct fund pool business, fund pool business agreements signed by the sponsoring company and member companies, or clear proof of rights and obligations issued by the multinational company with the consent of all parties involved; 3. "Confirmation of Conducting Multinational Company Domestic and Foreign Currency Integrated Fund Pool Business" jointly signed by the sponsoring company and the cooperative bank (see Annex 1); 4. Copies of business licenses of the sponsoring company and domestic member companies; 5. Registration documents of foreign member companies provided in non-Chinese languages should also include Chinese translations; 6. Financial business license and approved business scope documents (only required for sponsoring companies that are financial companies); 7. Authorization letter from the sponsoring company to the cooperative bank (if applicable). The materials under item 2 above should be stamped with the official seal of the multinational company, and all other materials should be stamped with the official seal of the sponsoring company. (2) Special materials: 1. Centralized management of foreign debt quotas. In addition to basic materials, when the sponsoring company applies for registration of centralized foreign debt quotas, it should provide the following special materials: the application form should list the names of domestic member companies participating in the centralization of foreign debt quotas, unified social credit codes, registered locations, the latest audited equity status of each domestic member company, the proposed centralized foreign debt quotas, and provide the contributed foreign debt quotas.A copy of the latest audited balance sheet of the member company.2. Centralized management of overseas lending limits. The sponsoring company applies for centralized registration of overseas lending limits, and in addition to providing basic materials, should also provide the following special materials: the application should list the names, unified social credit codes, registered locations of domestic member companies participating in the centralized overseas lending limits, the latest audited owner's equity status of each domestic member company, the proposed centralized overseas lending limits, and provide a copy of the most recent audited balance sheet of the member company contributing to the overseas lending limit. 3. Centralized collection and payment of current account funds and net settlement. The sponsoring company applies for registration of centralized collection and payment of current account funds and net settlement, and in addition to providing basic materials, should also provide the following special materials: the application should list the names, unified social credit codes, and registered locations of domestic member companies participating in centralized collection and payment of current account funds and net settlement. The above special materials should be stamped with the official seal of the sponsoring company. If there are unclear or inaccurate information in the aforementioned basic materials and special materials that require verification of their substantive content, the local foreign exchange bureau may request to improve the application materials or provide a written explanation. Article 8 Provincial foreign exchange bureaus should, in accordance with relevant regulations, complete the filing procedures upon receipt of complete application materials related to the fund pool business, together with the local branches of the People's Bank of China, and issue a filing notice (see Annex 2) through the local foreign exchange bureau where the sponsoring company is located. Article 9 For changes in capital projects that do not involve external debts and overseas lending limits, or changes in the names of sponsoring companies or member companies, the sponsoring company should report to the cooperating bank within 30 days from the date of occurrence of the matter. At the same time, the relevant information of the companies involved in the changes should be submitted, along with proof of the changes (such as updated business licenses). The cooperating bank will process the changes in the "SAFE System for Foreign Exchange" banking module based on the application submitted by the sponsoring company. Article 10 During the operation of the multinational company's fund pool business, if adjustments are planned for matters other than those mentioned in Article 9, the sponsoring company should apply for registration of changes to the local foreign exchange bureau 30 days before making the adjustment. Upon receipt of complete application materials for changes, the provincial foreign exchange bureaus, in accordance with relevant regulations, together with the local branches of the People's Bank of China, will complete the registration procedures for changes and issue a notification of registration through the local foreign exchange bureau where the sponsoring company is located. (1) For changes in cooperating banks, the following materials should be submitted: 1. Application for changing cooperating banks (including information on the selected cooperating bank, handling of the original account balance, etc.); 2. Original account balance statement stamped with the business seal of the bank; 3. "Confirmation Letter for Handling Multinational Company's Local and Foreign Currency Integrated Fund Pool Business" signed between the sponsoring company and the new cooperating bank. (2) For changes in the sponsoring company, types of businesses, member companies under the current account funds centralized collection and payment and net settlement business, external debt and overseas lending limits, etc., the relevant materials related to the changes should be submitted in accordance with Article 7. The application materials can be submitted by the sponsoring company as the applicant, or the sponsoring company can entrust a cooperating bank to submit on their behalf. Article 11 The sponsoring company must open a domestic capital main account within one year of receiving the filing notice and actually carry out the fund pool business, otherwise the filing notice will expire one year from the date of issuance. Article 12 If a multinational company intends to stop conducting fund pool business, the sponsoring company should apply for deregistration through the local foreign exchange bureau to the provincial foreign exchange bureaus after handling relevant debts, closing the domestic capital main account, and submitting the application and original filing notice within 30 days from the date of completion. The application should specify the foreign debt and overseas lending limits, foreign exchange receipts and payments, and the closure of the domestic capital main account related to the fund pool business. Upon receipt of the application materials, the provincial foreign exchange bureaus, in accordance with relevant regulations, will complete the deregistration procedures together with the local branches of the People's Bank of China and retrieve the original filing notice. Chapter 3 centralized management of external debt limits Article 13 Multinational companies may centralize the external debt limits of domestic member enterprises based on macro-prudential principles and conduct external debt business within the centralized limits in accordance with commercial practices. Article 14 Multinational companies' sponsoring enterprises may centralize the external debt limits of domestic member companies according to the following formula. Centralized external debt limit for multinational companies = (latest audited owner's equity of the sponsoring enterprise + latest audited owner's equity of domestic member enterprises * concentration ratio) * cross-border financing leverage * macro-prudential adjustment parameter. Weighted balance of external debt risk for multinational companies = balance of foreign currency debts + balance of foreign currency debts * exchange rate risk conversion factor. The weighted balance of external debt risk for multinational companies should not exceed the centralized external debt limit for multinational companies. During the initial period, the cross-border financing leverage is 2, the macro-prudential adjustment parameter is 1.75, and the exchange rate risk conversion factor is 0.5. The People's Bank of China and the State Administration of Foreign Exchange may adjust the cross-border financing leverage and macro-prudential adjustment parameters, as well as the exchange rate risk conversion factor based on the overall external debt situation, maturity structure, currency structure, etc. Financial companies acting as sponsoring enterprises are not allowed to participate in centralized external debt limits. Each member company can decide on partially centralized external debt limits, with adjustments made at most once a year. For external debt limits not centralized, each member company should handle external debt business according to existing regulations. Article 15 If the sponsoring enterprise of a multinational company centralizes borrowing external debts or acts as an agent for its member enterprises to borrow external debts, they should do so through the sponsoring enterprise's domestic capital main account. Member enterprises that borrow external debts on their own should do so through their own external debt accounts within the uncentralized limits. Article 16 The local foreign exchange bureau where the sponsoring enterprise is located should, when issuing a filing notice to the sponsoring enterprise, complete a one-time registration of external debts for the sponsoring enterprise in the relevant information system of the State Administration of Foreign Exchange based on the centralized external debt limit that has been filed. Chapter 4 centralized management of overseas lending limits Article 17 Multinational companies may centralize the overseas lending limits of domestic member enterprises based on macro-prudential principles and conduct overseas lending business within the centralized limits in accordance with commercial practices. The scale of overseas loans under the multinational company's fund pool business should be adapted to the operating scale of the overseas borrowers.It is not allowed to indirectly evade the management requirements for overseas direct investment, securities investment, etc., and it is not allowed to be used directly or indirectly for expenditures outside the borrower's business scope.Article 18 The sponsoring enterprise of a multinational corporation may concentrate the amount of overseas loans by domestic member enterprises according to the following formula. The concentration amount of overseas loans for multinational corporations = (the audited owner's equity of the sponsoring enterprise in the most recent period + the audited owner's equity of domestic member enterprises in the most recent period * concentration ratio) * overseas loan leverage ratio * overseas loan macro-prudential adjustment coefficient. The risk-weighted balance of overseas loans for multinational corporations = foreign currency overseas loan balances + foreign currency overseas loan balances * currency conversion factor. The risk-weighted balance of overseas loans for multinational corporations should not exceed the concentration amount of overseas loans for multinational corporations. At the initial stage, the overseas loan leverage ratio is 0.8, macro-prudential adjustment coefficient is 1, and the currency conversion factor is 0.5. The People's Bank of China and the State Administration of Foreign Exchange may adjust the overseas loan leverage ratio, the overseas loan macro-prudential adjustment coefficient, and the currency conversion factor based on the overall situation of overseas loans, maturity structure, currency structure, and so on. Financial companies acting as sponsoring enterprises are not allowed to participate in the concentration of overseas loan amounts. Each member enterprise can independently decide on a portion of the concentrated overseas loan amount, with a maximum adjustment frequency of once a year. The uncollected overseas loan amount should be handled by each member enterprise for overseas loan business in accordance with existing regulations. Article 19 If the sponsoring enterprise acts as the actual lender to concentrate overseas loans or if a member enterprise acts as the actual lender on behalf of the sponsoring enterprise for overseas loans, it should be handled through the sponsoring enterprise's domestic fund main account. If a member enterprise conducts overseas loans independently, it should be handled through the member enterprise's own overseas loan account within the uncollected amount. Article 20 When the local foreign exchange bureau of the sponsoring enterprise issues a filing notice, it should register a one-time overseas loan amount for the sponsoring enterprise in the relevant information system of the State Administration of Foreign Exchange according to the centralized overseas loan amount filed. Chapter V Management of Centralized Collection and Payment of Current Account Funds and Netting Settlement of Offset Amounts for Multinational Companies Article 21 Multinational corporations may, according to operational needs, conduct centralized collection and payment of current account funds or netting settlement of offset amounts through the sponsoring enterprise. The centralized collection and payment of current account funds refer to the sponsoring enterprise handling current account receipts and payments on behalf of domestic member enterprises through the domestic fund main account. Offset netting settlement of current account funds refers to the sponsoring enterprise aggregating its receivables and payables of domestic and foreign member enterprises under current accounts through the domestic fund main account, consolidating transactions received and paid within a certain period into a single transaction. In principle, netting settlement should be conducted no less than once per natural month. Domestic member enterprises are required to handle transactions based on the "Foreign Exchange Business Registration Form for Goods Trade" and should not participate in the centralized collection and payment of current account funds and netting settlement of offset amounts, in accordance with relevant regulations. Article 22 When issuing a filing notice for the sponsoring enterprise, the local foreign exchange bureau should register the goods trade foreign exchange business for the sponsoring enterprise in the relevant information system of the State Administration of Foreign Exchange. Article 23 If a multinational corporation stops conducting the centralized collection and payment of current account funds and netting settlement of offset amounts, the sponsoring enterprise should inform the cooperating bank within 30 days of cessation and report to the local foreign exchange bureau on its own or through the cooperating bank. This article is from the "Central Bank's Official Website", edited by: Xu Wenqiang.