Custody Solution for RQFII Bank of China Custody & Investor Services Dept. 2013.11 0 0
Custody Solution for RQFII 1. RQFII Background 2. BOC RQFII Custody Service Content 3. BOC RQFII Custody Service Overview 1
1. RQFII Background 2 2
RQFII Background RQFII(RMB Qualified Foreign Institutional Investors) ( RQFII for short),which is based on the previous QFII(Qualified Foreign Institutional Investors)( QFII for short),as a creative trial, allowing oversea asset management institutions to finance RMB and invest domestic stock market Key RQFII Regulations : Experimental Measures for Domestic Securities Investments by RMB Qualified Foreign Institutional Investors, promulgated by CSRC, CBRC and SAFE on 6 March 2013, and nullified Experimental Measures for Fund Management Company and Securities Company Investments by RMB Qualified Foreign Institutional Investors issued on 16 December 2011 Regulations on concerning the implementation of the Experimental Measures for Domestic Securities Investments by RMB Qualified Foreign Institutional Investors, issued by CSRC on 6 March 2013 Notice on concerning the Issues of the Experimental for Domestic Securities Investments by RMB Qualified Foreign Institutional Investors, issued by SAFE on 11 March 2013 Notice on concerning the implementation of the Experimental Measures for Domestic Securities Investments by RMB Qualified Foreign Institutional Investors, issued by CBRC on 2 May 2013 3
RQFII Background RQFII s pilot area enlarged from Hong Kong to Taipei, London and Singapore, quota increased from 20 billion RMB to 500 billion RMB Hong Kong On 16 December 2011, qualified fund company and securities company s Hong Kong subsidiaries were allowed to finance RMB in Hong Kong and invest domestic stock market, the pilot quota was 20 billion RMB. In June 2012, adding RQFII investment quota to 50 billion RMB, to be used for issuing A share ETF product, investing A-share index constituent stock and listing in Hong Kong Exchange. By the end of 2012, increasing investment quota to 200 billion and expand the pilot bodies to all Hong Kong s financial institutions. Taipei, London and Singapore New quota RMB100 billion for Taiwan applicants (announced by CSRC in Jan 213 pending further details) RQFII regime to be implemented in Singapore and London(announced Jun 2013) New quota RMB80 billion for London (announced 15 Oct 2013) New quota RMB50 billion for Singapore (announced 22 Oct 2013) 4
RQFII Background Subject RQFII Main Body Lastest Laws and Regulations Financial Institutions whose registration and opreation are located in Hong Kong, London, Taipei and Singapore. License Requirement Type of Investment Product Investment Quota Qualification Approval(CSRC) Quota Approval(SAFE) Asset management qualification which is issued by oversea securities regulatory authorities. Based on self-decision, investment including RMB financial instrument like stock, bond, warranties, fixed-income products in interbank bond market, securities investment funds and index stock futures. Increased to 500 billion RMB. Custodian bank serves on behalf of the applicant and approval is judged on the basis of institution. Custodian bank serves on behalf of the applicant and approval is judged on the basis of product. 5
RQFII Background Hong Kong Singapore Taiwan London RMB Deposits RMB 698bn 1 RMB 60bn 2 RMB 70bn 3 RMB 11.9bn 4 RQFII Quota RMB 270bn RMB 50bn RMB 100bn 5 RMB 80bn Clearing Bank BOC HK ICBC SG BOC TW In Discussion RMB Services Offered Retail and Commercial banking FX Primary and secondary RMB securities market RMB trade facilities Retail and commercial banking FX Some financial market products RMB trade facilities Retail and commercial banking Limited financial market products RMB trade facilities FX Limited financial market products Limited retail and commercial banking PBOC SWAP 400bn CNY/490bn HKD 300bn CNY/60bn SGD In Discussion 200bn CNY/20bn GBP Focus Markets Greater China RTC Pilot Schemes/New Products Dim sum bond market South East Asia RTC Commodities Hub Private Banking Domestic/Cross-Strait RMB Usage Global Treasury Centre Global FX Trading Asset management Frankfurt, Luxembourg, Paris, Toronto and Dubai have publicly expressed interest in becoming an offshore RMB centre 1 As of May 2013 3 As of June 2013 5 Pending Approval 2 As of May 2012 4 As of Dec 2012 Source: CSRC 2013 6
2.BOC RQFII Custody Service Content 7 7
BOC RQFII Custody Service--Application Service Application Service: Applying RQFII investment license to CSRC on behalf of client Applying RQFII investment quota to SAFE on behalf of client Making appointment with regulatory authories: providing a channel to communicate with regulatory authories fot applicant Communicating and analysing regulatory administration's information: by keeping well-informed of the information exchange with regulatory authories, offering the RQFII policy news to client Sharing Experience: sharing previous BOC client s RQFII achievement with applicant 8
BOC RQFII Custody Service--Application Service CSRC (To approve RQFII status by granting RQFII licenses) Domestic Custodian Bank RQFII SAFE (To grant RQFII quota to RQFII products) Domestic Broker Application Process: 1 Deputizing domestic custodian bank and signing custody agreement and operation memorandum. 2 Submitting RQFII application to CSRC through custodian bank 3 Submitting RQFII quota application to SAFE through custodian bank 4 Settlement agent bank sending CIBM investment application to PBOC 5 Settlement agent bank sending account opening application to CCDC(China Central Depository & Clearing Co.Ltd) 6 Sending account opening application to CSDC(China Securities Depository & Clearing Co.Ltd) 7 System Test 8 Capital Inflow 9 Initiating Investment 9
BOC RQFII Custody Service--Application Service Custody Operation: Safekeeping all RQFII's assets; Opening RQFII capital and securities account; Compeleting securities' delivery and capital settlement ; Providing lastest information for position holding company; Offering tax payment and refund for RQFII; Monitoring RQFII's domestic capital operation; Providing RQFII with cash and position holding report from the assets in custody(for detail see attached table); Conducting capital inflow and outflow service for RQFII; Completing the declaration and statistics on international receipts and payments in compliance with relevant regulation; Submitting relevant reports and tables to CSRC, PBOC and SAFE 10
BOC RQFII Custody Operation Framework Singapore China Investor $ $ Fund Manager Global Custodian Bank Singapore Branch: Head office Seb-Custodian Bank Settlement Institution Client Services Broker Domestic Broker BOC Head office:serving as the seb-custodian bank to sign custody agreement with custodian bank, providing local custody service BOC Singapore Branch:Offering face to face client service to Global Custodian and RQFIIs 11
BOC RQFII Custody Service--Account Opening Singapore RQFII Client Opening Custody Account Golbal Custodian Bank China BOC: Seb-Custodian Bank Securities Account Cash Account 1.Exchange: Shanghai,Shenzhen CSDC:opening account in the form of RQFII 2.Interbank: CCDC:Class A member opens account on behalf of RQFII Shanghai Clear ing House:Opening C class bond custody account 3.Open-ended fund: Fund Company:Opening account in the form of RQFII fund 1.Basic deposit account: Established in custody and settlement bank, in the form of RQFII 2.Special deposit account: Interbank:Opening interbank special deposit account in the form of RQFII+ fund name. Trading:Opening special deposit account in the form of RQFII+ fund name 12
BOC RQFII Custody Service--Transaction and Settlement Singapore China Data and Payment Order Global Custodian Bank Generating the settlement instruction based on data Checking the cash position and send payment order Checking the security and/ or cash position and send the order Seb-Custodian Bank Checking the security and/or cash position Clearing the cash and settling the securities Settlement Institution Domestic Broker 13
BOC RQFII Custody Service--Corporation Action Corporation action usually refers to the events caused by securities issuer in the duration period, which will affect part or all the issued securities Interest Payment Bond coupon interest Rate Corporate Income Payment Cash Bonus Stock Dividend Optional Bonus Dividend Redistribution Capital Reserve Distribution Liquidation Transfering/additional issuing stock Equity Reorganization Changing Stock Segmentation Stock Merging Capital Fund Returning Stock Repurchase Warranties Execution Liability and Equity Reorganization Debt to Equity Debt Payment Repayment of Bond Financing Capital Allotment of Shares Priority Allotment Corporate Reorganization Corporate M&A Corporate Spliting Corporate Purchasing Notice Voting Agent Notice Information Notice 14
BOC RQFII Custody Service--Investment Monitoring According to Experimental Measures for Domestic Securities Investments by RMB Qualified Foreign Institutional Investors,Securities Law,etc, through automatic processing, RQFII will monitor RQFII's asset in BOC after every valuation day 1 Investment manager and custodian will negotiate and insure investment restriction. Monitoring staff will make supervising record according to the criteria. 2 Monitoring staff will analyse the supervising record and input the detail monitored index in the monitoring system, testing the acuracy, making sure the reliablity of the operation. 3 After daily evaluation, monitoring staff will import external data like market data and transaction data through monitoring system, and evaluate financial data, generate monitoring result and postsupervise investment after evaluation day. 4 When violation is found during post-supervising, monitor staff will confirm with invesnment manager, after confirmation, making Temporary Monitoring Report, signed and chopped with stamp and fax, email or by other means send to asset bailor 15
BOC RQFII Custody Service--Tax Management Income Tax Completing income tax payment on behalf of client CSDC will deduct the tax involved with CSDC, for the income tax generated from securities, custodian bank will remit to the withholding obligatory account(according to domestic tax law, obligator is the securities issuer).for the deposit interest tax, it will be deducted by custodian bank and turned in tax bureau. - Tax Rate Deposit interest tax(7%),other income tax(10%)others are depended on relevant law Tax refund service(as appropriate) Stamp duty:0.1% Capital Gains tax:temporary none Temporary not levied Managers are free to choose whether to do accounting management 16
BOC RQFII Custody Service-- Report Content Report Target Deadline Notice Custodian's local SAFE Putting Account Opening on Record Details on RQFII's capital inflow and foreign exchange purchasing Monthly financial report on RQFII's securities investment(1)(2) Annual financial report on RQFII's securities investment(1)(2) SAFE SAFE SAFE It is required to put on record in 5 working days after the "special institution code"is established,after which the account is permitted to be opened Within 5 working days after previous month ends Within 5 working days after previous month ends Within 3 month after last accounting year Since Novemeber of 2013, the RQFII monthly report includes RQFII's monthly balance sheet, account balance and investment capital's inflow and outflow Since November of 2013, annual report includes yearly balance sheet and profit and loss information 17
BOC RQFII Custody Service-- Report Content Report Target Deadline Notice Information on PBOC 's settlement account opening,permitted investment quota, amount of money financed, capital cross-border transaction information and RQFII's asset allocation PBOC Within 5 working day after business starts CSRC's weekly report CSRC Within 5 working days after previous week ends CSRC's monthly report CSRC Within 5 working days after previous month ends 18
3.BOC RQFII Custody Service Overview 19
BOC RQFII Custody Service Overview 100 Years' Brand Experienced in custody services One-stop Custody Service 20
100 Years' Brand 100 Years' Brand Bank of China was established in February 1912, and transformed as a wholly state-owned commercial bank in 1994. In August 2004, Bank of China Limited was founded and in June and July 2006, BOC was successfully listed in Hong Kong Exchange and Shanghai Exchange, becoming the first commercial bank who was both listed in A stock market and H stock market. Admission on Systemically Important Fnancial Institution BOC was admitted in SIFI in 2011,2012 and 2013 consecutively, which is the only financial institution nominated among emerging economies and China in consecutive 3 years 21
Experienced in custody services Position as Custodian In July 1998, through PBOC and CSRC's verification, BOC became one of the very five custodian banks in mainland who were entitled with fund custody business. Type of custody includes fund, insurance, trust, suecrities, financial products, social securities, pensions, etc, and firstly issued crossmarket ETF fund, cross-border ETF fund, QDII, QFII, RQFII and other custody products in custody market. Type of client includes sovereign institution, insurance institution, f u nd company, securities compan y, b ank an d co rporate client,administrative institution, foundation, VIP and other clients By the end of 2012, BOC group s assets under custody had exceeded 4 trillion RMB, amongst which, domestic assets under custody exceeded 3 trillion, which increased 44% compared with previous year and ranked as the second aomong Chinese banks. 22
Experienced in custody services Risk Management BOC became the first bank who gained Ernst & Young's special audit report on custodian's internal control according to double standard S AS70 and AAF/0106. In 2012, BOC's custodian service gained Ernst & Young's "true and f air" audit report according to ISAE3402 and SSAE16 standard IT Development In 2009, BOC developed global custody system independedntly, and was awarded the second class prize on IT development by PBOC. In 2012, BOC became the first custodian bank who could direct li-nk ed with CCDC through system in mainland China. 23
Experienced in custody services QFII/RQFII Custodian Experience In 2003, BOC became the first group of banks who gained QFII custodian qualifacation and provided QFII custodian service in September 2004. By the end of September 2013, QFII assets under custody exceeded 39.8 billion RMB, which accounted for 35% of custody share among Chinese custodian banks and ranked as the first among Chinese banks. In 2012, among the 21 RQFII trial institutions, BOC gained 15 of them, which accounted for 75% in market share and ranked as the first in custody business. By the end of September 2013, the scale of RQFII under custody reached 9.60 billion RMB, which ranked the first among Chinese banks and also the first in market share in terms of client number. 24
One-Stop Custody Service Based on BOC's global network, using BOC Singapore Branch as service window, providing Singpore client with local service BOC headoffice serves as the seb-custodian bank Using BOC group's network, assisting RQFII's client to enlarge global sales. By making advantage of BOC's local coverage, assisting RQFII's client to communicate with regulatory authorities and expand mainland market 25
Cash Projection Statement & Cash Statement 26
Security Statement & Security Movement Statement 27
Reports for SAFE 28
Reports for SAFE 29
Reports for SAFE 30
Reports for PBOC 31
Reports for PBOC 32
Reports for CSRC 33
Reports for CSRC 34
Thank you! Hui Wang Head of Custody & Investor Services Dept, BOC H.O. Tel: +86 10 6659 4905 Peng Wang Senior Manager of Custody & Investor Services Dept, BOC H.O. Tel: +86 10 6659 2835 Jian Lu Financial Institutions Dept., BOC Singapore Branch Tel: +65 6412 9070 Disclaimer The contents provided by Bank of China Ltd. ( BOC ) herein are not intended to provide investment advice nor are they an offer or invitation to your company / you to enter into any transaction or investment. Their primary purpose is to provide your company / you with product profiles and working examples (if applicable). BOC is the owner of the contents herein. No part(s) hereof shall be reproduced and referred to without BOC s prior permission. While attempts are made to ensure the accuracy and completeness of the contents at the time of their publication, BOC does not represent or warrant their accuracy and completeness and it shall not be responsible for any transaction or investment made by any party who relies on such contents. 35