Administrative Rules on Financial Leasing Companies replaces the old one and it will come into effect on March 1, 2007.

 

The old Measures promulgated in 2000 and it had been very helpful in financial leasing business. In spite of it, the old one still needs to be amended and improved. Since we had promised the opening of financial leasing business to foreign banks in treaties of WTO, the transition period was over in 2006. New rules are urgently needed.

 

According to the explanation of China Banking Regulatory Commission, the amendments are as follows:

 

To start with, it is about the qualifications of stockholders. The new Measures add the concept of major investor and general investor. Based on Article 8, major investor is the investor whose amount of investment is 50% more than the registered capital of the financial leasing company. General investor is the other investor except major investor. It is said that not all investors can be major investors. Only commercial banks, leasing companies, large enterprises whose products are used for financial leasing companies and other recognized financial agencies can be major investors. All the commercial banks home and abroad are allowed to set financial leasing companies if satisfying certain requirements.

 

Second, it is the requirements for lowest registered capital. The lowest registered capital of financial leasing companies was 50 billion in RMB or other freely convertible currency in the old regulation. The new Measures decreases the standard into 10 billion, but the capital adequacy rate should be over 8%. Different kinds of companies have different standards in their business as well.

 

Third, it is the scope of business. Financial leasing companies can run 1-year deposit business for stockholder at regular intervals, transfer leasing amount to commercial banks as well. Compared with old rules, providing circulating loans to leaser for leasehold, investment of securities and interest of financial agencies, and guarantee are not included.

 

Last but not least, management by supervision is strengthened. New Measures put forward regulations on related exchange and leaseback. It sets up a system of reorganization, examination and reporting. From Article No.29 to No. 34, detail management is given in guiding financial leasing companies.

 

New Measures also pays attention to leaseback, preventing it become another way of loan. Clauses on capital debt ratio are deleted in new Measures.

 

At present, there are only 12 financial leasing compaines in China Mainland. China leasing conpany LTD. and China electronic leasing company LTD. have been shutout and consolidated since 2000, and have not yet been reformed and registered. The other 4 financial leasing companies were shutout too. There are only 6 companies running financial leasing business cautiously and low-pitched. CBRC has not approved any one of new financial leasing companies since 2000. December 18 of last year, Bank of China pronounced the merger of Singapore Aircraft leasing Enterprises in nearly 100 billion U.S. dollar, being the first commercial bank stockholder in financial leasing industry.

 

China Minsheng Banking Corp.LTD. and other 5 commercial banks are applying to CBRC on setting up financial leasing companies on a near day.

 

Insiders have the idea that the openning of financial leasing to commercial banks will energize and refresh the financial leasing business. However, it will also make them facing much more competitions.

 

It is said that from the commercial banks’ perspective, the new rules will enable them to expand their business scope, customer base and to improve their profitability, thus contributing to the enhancement of their core competitiveness. The new rules are also in line with the common practice of financial leasing activities in the major market economies. From the perspective of financial leasing industry, it will embrace the broader human resources, customer relations, business networks and other advantages brought by commercial banks. As a result, the presence of commercial banks will stimulate the equipment sales, technical innovations, and in a broader sense serve as an impetus to drive the sound and rapid economic development. To sum up, the new rules fully comply with China’s WTO commitments by according the identical “national treatment” to foreign banks to start financial leasing business.