The State Administration of Foreign Exchange (SAFE) has made arrangements to carry out the reform of the foreign exchange business of banks, which is gradually promoted on the premise of voluntariness

21st Century Business Herald reporter Tang Jing reported from Beijing

After more than a month of public consultation, the new regulations on the management of banks' foreign exchange business were officially released.

On December 29, the State Administration of Foreign Exchange (hereinafter referred to as the "State Administration of Foreign Exchange") promulgated the Administrative Measures for Foreign Exchange Business of Banks (for Trial Implementation) (Announcement No. 1 of 2023 of the State Administration of Foreign Exchange, hereinafter referred to as the "Business Development Measures"), which will come into force on January 1, 2024.

In accordance with the spirit and deployment requirements of the Central Financial Work Conference, in order to further enhance the bank's foreign exchange business capacity, promote cross-border trade and investment and financing facilitation, and effectively prevent cross-border capital flow risks, the State Administration of Foreign Exchange has fully summarized the beneficial experience in recent years, extensively solicited the opinions of commercial banks, and on the basis of some banks' pilot projects, formulated these measures to promote the reengineering of commercial banks' foreign exchange business processes and create an institutional environment compatible with high-level opening-up.

In view of the problems of "failure to perform due diligence" and "excessive review" in the process of implementation of foreign exchange management reform in recent years, the Measures establish a general framework for banks' foreign exchange business development, and further refine and clarify the standards for banks' business development before, during and after the event, so as to facilitate banks to effectively perform their audit duties.

It is worth noting that, for the first time, the Measures for Business Development mentions "due diligence and exemption" in the foreign exchange management regulations, clarifying in the form of legislation that the foreign exchange business carried out by the customer in the bank is suspected of violating the foreign exchange management regulations, but if the bank can prove that it has taken the foreign exchange business development measures diligently and responsibly, the relevant legal liability will not be investigated, and the "consequentialism" will be eliminated, so as to dispel the concerns of the bank in implementing the foreign exchange facilitation policy, and better encourage the bank to "be capable, willing to do and dare to work". The State Administration of Foreign Exchange will also release an explanatory case of "due diligence exemption" to banks to help them accurately grasp the boundaries of due diligence.

Wang Chunying, deputy director and spokesperson of the State Administration of Foreign Exchange, said that pilot projects have been carried out in four commercial banks in the early stage, and the pilot results have been good. According to the feedback from the pilot banks, the reengineering of foreign exchange business processes is in line with the bank's own needs for improving risk control and business development, and the cost is controllable, which is conducive to improving the bank's operational efficiency and management effectiveness.

Gradual progress based on the premise of voluntary banking

Wang Chunying introduced that the "Business Development Measures" promote the reengineering of commercial banks' foreign exchange business processes, build a whole-process business development framework including pre-event customer identification and classification, in-process differentiated review, and post-event monitoring reports, strengthen the risk responsibility of pre-event and post-event links, break the previous path dependence of "risk prevention" on the in-process link, further improve the efficiency of bank foreign exchange business, and enhance the level of cross-border trade and investment and financing facilitation.

Specifically, the Business Development Measures draw on the current experience of facilitation reforms and clarify that banks "shall adopt differentiated review measures based on the customer's foreign exchange compliance risk level and overall judgment of business risk". First, the Business Development Measures provide a general framework for the facilitation of foreign exchange business, simplify the process in a unified manner, and allow high-quality customers to enjoy the existing facilitation measures under both the current account and the capital account. Second, banks can handle foreign exchange business with high-quality customers according to customer instructions, giving banks more room for product innovation. Third, the policy application is flexible, and banks and enterprises can voluntarily choose to apply the Business Development Measures or the original relevant foreign exchange management laws and regulations. Fourth, foreign exchange risk screening and identification are carried out based on the system, and the post-event monitoring is more accurate, so that customers "have no violations and do not disturb".

Wang Chunying pointed out in an article that different from the bottom-up approach of traditional regional pilots, the pilot of business development reform takes the head office of the bank as the starting point, forming an institutionalized and systematic arrangement, and implementing it from the top down. The head office of the bank "grasps the general office", which is convenient for the branch to copy at low cost and quickly and effectively transmit and implement the business requirements. She also stressed that the reform of the business development is closely related to the overall facilitation and risk prevention, and adheres to seeking truth from facts and seeking progress while maintaining stability, which is a basic and long-term work to promote the transformation of foreign exchange management methods.

The first is to do solid research and do a good job in the construction of supporting systems. Relying on the experience of the pilot banks, the State Administration of Foreign Exchange has refined and summarized the specific management requirements of key links, and gradually explored and formed industry norms, such as the scope of customer due diligence elements, the basic coverage of customer classification standards, and the construction standards of the post-event monitoring system system. These standards are the yardstick for future industry compliance, and they need to be both effective and operable, and the next step will be to release them in a timely manner.

The second is to follow up on counseling, and start one after another. The State Administration of Foreign Exchange respects the objective differences in the scale of banks' cross-border business, the cost of adjusting the business model, etc., and gradually promotes the implementation of the Measures on the basis of the bank's voluntary premise. In the process of transforming the bank's system and improving its business processes, the State Administration of Foreign Exchange will provide corresponding guidance and support to reduce the cost of trial and error. At present, a counseling team has been established in the location of the main corporate bank to connect with the relevant banks to carry out preparatory work, and in the future, one will mature and expand to ensure that the overall process is stable and controllable.

The third is the empowerment of science and technology to continuously improve the accuracy of supervision. In line with the reform of banks' foreign exchange business, the State Administration of Foreign Exchange will apply financial regulatory technology to improve the level of intelligent analysis, screen and verify bank risk transaction reports, improve the ability to accurately identify foreign exchange risks, and promote the realization of "risk, nowhere to run, no violations, no disturbance".

Enhance the ability of commercial banks to manage their own risks

Liu Yunfei, Deputy General Manager of the Transaction Banking Department of Bank of China, said that after the implementation of the pilot, the relevant institutions of Bank of China will use straight-through and online products as the starting point to provide cross-border payment facilitation services for high-quality customers, and can directly handle cross-border transactions for high-quality customers with instructions under the most convenient circumstances. According to market feedback, customers said that the business review materials were further simplified, and the audit was faster and more convenient, which could effectively reduce financial and labor costs. In addition, high-quality customers rely on online document review and other services, and the whole business process is handled online, so that corporate financial personnel can accurately grasp the timing of capital inflow and outflow, improve the efficiency of enterprise capital management, further reduce the "foot cost" of enterprises, and optimize the quality and efficiency of serving the real economy.

Zhang Lin, General Manager of the International Business Department of China CITIC Bank's Head Office, believes that the pilot work of business development reform has explored and innovated a set of systematic business development frameworks throughout the whole process before, during and after the event, which has made a major change in the top-level design of foreign exchange business management and realized the optimization of the whole process. The pilot policy further enriches and expands the connotation of authenticity review, strengthens the management responsibilities of banks before and after the event, creates conditions for differentiated management during the event, and improves banks' independent risk management capabilities, which is conducive to creating a market environment of "the more honest the more convenient".

Xu Feng, General Manager of the Transaction Banking Department of China Minsheng Bank, said that after the pilot operation, the customers and business coverage benefited by the facilitation policy have been significantly improved, and customers have reported that the efficiency of cross-border remittance has been improved and the cost of business processing has been reduced. Through the pilot reform of foreign exchange business, China Minsheng Bank can handle foreign exchange business for it with the instructions of high-quality customers, and the internal processing process and the time for handling business in the bank have been greatly reduced, and the cumulative half day can successfully pay foreign exchange.

Xu Feng also pointed out that the pilot project has effectively improved the internal management efficiency of banks. First of all, the reform of the foreign exchange business has further opened up the bank's internal information, promoted internal information sharing, and improved the comprehensive utilization efficiency of the bank's data assets, which is conducive to a more comprehensive understanding of customers. At the same time, standardized and standardized customer risk classification management is conducive to reaching customers more accurately with different types of services. In addition, after the reform of the foreign exchange business, the bank has established a complete set of foreign exchange risk transaction monitoring, screening and disposal systems to realize the transformation of risk prevention and control from "human control" to "machine control", and risk identification is more accurate and timely.

Wang Chunying said that under the demonstration and drive of the pilot banks, the enthusiasm of commercial banks is relatively high, and they have given full play to their subjective initiative, kept pace with the times, further explored and improved business processes and management structures, and effectively improved cross-border financial services and cross-border risk prevention capabilities.

She also said that in the next step, the State Administration of Foreign Exchange will thoroughly implement the spirit of the Central Financial Work Conference, steadily promote the reform of the bank's foreign exchange business, guide the bank to make solid preparations and steadily promote the reengineering of the foreign exchange business process, and promote the bank to establish and improve the institutional and systematic arrangements that take into account facilitation and risk prevention, so as to effectively escort the high-quality development and high-level opening up of the financial industry.

For more information, please download the 21 Finance APP