Red Star News:
We have noticed that at the beginning of this year, management approach for bank foreign exchange businesses was implemented. How is the effect so far? What are the follow-up measures to further improve the bank's capabilities for expanding foreign exchange businesses? Thanks.
Wang Chunying:
Thank you for your questions. The SAFE issued the trial management approach for bank foreign exchange businesses at the end of 2023. The management approach adheres to the principle of "the more trustworthy, the more convenient" and "know your customer." The aim is to explore and promote a process of reengineering for commercial banks' foreign exchange business. It involves setting up a comprehensive business framework that includes customer identification and classification before the business process and differentiating in-process reviews and post-monitoring reports, so as to improve the mechanism of "those who have fulfilled their duties are not held accountable ," and to "reduce the burden" on enterprises and "relief pressure" on banks. Since being implemented over three months ago, the management approach has received positive comments from all sectors of society, with the effects and responses being quite good.
On the one hand, the reform of foreign exchange business in banks has created a more favorable policy environment which will offer more convenience to trustworthy clients. Mr. Zhu talked about policy support for foreign exchange facilitation in his briefing as well. By the end of this year's first quarter, four banks had participated in the reform's pilot program. These four banks have reduced the average time they spent in handling foreign exchange businesses for their top-tier Category I clients by 50-75%. For example, a lithium-ion battery company used to handle an average of 50 or 60 foreign exchange transactions every month. After being included in the Category I client policy, the business process was streamlined to less than an hour. The policy has made foreign exchange businesses much easier for companies. As such, companies have been benefiting from the reform. Local governments have also expressed their recognition of the reform and welcome it. Overall, the reform of foreign exchange business in banks represents an important measure to facilitate cross-border trade, investment and financing.
On the other hand, the reform of foreign exchange business in banks has been helpful in improving banks' services for cross-border financial businesses. First, it motives banks to integrate their internal information and to know about their clients in a comprehensive manner, so as to identify their target clients and make proper arrangements. Given the large amount of client information in different banks, the reform of foreign exchange business in banks enables commercial banks to integrate the internal information of their clients and to match high-quality services with low-risk clients. Therefore, this provides banks with greater space for product innovation. Second, risk identification has become more efficient. After the reform, banks are able to fully leverage knowledge about their clients from the beginning, allowing them to better fulfill their responsibilities for customer due diligence. Therefore, this will help banks identify risks early on and issue early warnings. Third, the principle that "those who have fulfilled their duties are not held accountable " has been clarified in legislation for the first time. This will thus enable banks to be competent, motivated and capable of engaging in such business, ensuring that facilitation policies can be effectively put into practice. We have released the first batch of 10 explanatory cases to help banks understand the criteria of principles accurately and to avoid unnecessary review. Overall, the logic behind the reform of foreign bank exchange businesses aligns with the direction of banks' business development and meets the requirements of banks' risk control. As such, the reform has been recognized by banks.
Currently, more banks are preparing for the reform of bank foreign exchange businesses, and reworking the process of foreign exchange businesses. More market entities are expected to benefit from the reform. Going forward, the SAFE will advance the reform in a sound and cautious manner, ensuring that the reform will be implemented only when the necessary conditions are in place. We will intensify endeavors to prevent and control risks in a bid to ensure that the foreign exchange management system and mechanism become more open and safer.
First, we will enhance policy promotion and guidance, providing tailored guidance for banks which would like to conduct reforms in a bid to reduce their trial-and-error cost. Second, we will introduce guidelines for relevant businesses by establishing a supportive regulatory system focusing on key parts, such as customer due diligence and customer classification, so as to offer specific operation standards for banks. Third, we will keep the case library updated to ensure the mechanism that "those who have fulfilled their duties are not held accountable" can be applied in more situations. We will provide the banks with appeal channels and third-party review mechanism in a bid to ensure inspections and law enforcement on foreign exchange businesses are more transparent and open.
The aforementioned is an overview of the situation regarding foreign bank exchange businesses. We'd love to get the state of affairs in front of a wider audience through media exposure. While "good wine needs no bush," we also afraid of not enough publicity. However, we are unafraid because we have all of you. Thank you.
