12 January 2016

PBOC promulgating new rules on individual RMB bank accounts – a new era for direct banking in China?

This article was written by Chen Yun(partner), Janet Gu(senior associate), Wang Rong(associate)

On December 25, 2015, People's Bank of China (PBOC) promulgated the Circular on Improving Individual Bank Account Services and Strengthening Account Management (the “New Individual Bank Account Circular”). In short, the New Individual Bank Account Circular introduces new categories of individual RMB bank accounts with different functions and account opening requirements and requires that banks impose classified management based on the real name system with respect to different categories of individual bank accounts. In this regulatory alert, we will take a preliminary look at some of the key features and implications of the New Individual Bank Account Circular.

Key Features

Three categories of individual bank accounts

 

Type I Bank Account

 Type II Bank Account

Type III Bank Account

Account Opening Method

 

  • over the counter or via self-help teller machines
  • over the counter, via self-help teller machines, or via E-channels
  • over the counter, via self-help teller machines, or via E-channels

Customer identification

  • Real name system
  • Customer ID must be verified onsite by bank employees
  • Real name system
  • PRC identity cards only if via self-help teller machines or via E-channels
  • Must be linked to Type I Bank Account of the same customer if via E-channels

 

  • Real name system
  • PRC identity cards only if via self-help teller machines or via E-channels
  • Can only be activated by transferring funds from Type I Bank Account of the same customer

Account Function

Fully functioned normal account, including without limitation:

  • Deposit
  • WMP
  • Fund transfer
  • Consumption & Payment
  • Cash withdrawal
  • Physical media (debit card)

Limited functions, including:

  • Deposit
  • WMP
  • Fund transfer to linked account
  • Consumption & payment up to RMB10,000 daily

 

Maximum account balance of RMB1,000 and limited functions, including:

  • Consumption/payment within maximum balance
  • Balance may only be returned to Type I  Bank Account of the same customer

 

Biometric technologies

The New Individual Bank Account Circular provides that banks shall use government data base, banks’ own data base, commercial data base, other banks’ data base, etc. to cross check the identities of the account opening applicants. In addition, those banks having relevant capabilities may explore the application of biometric recognition technology or other safe and effective technology as the supplemental method for customer identification.

Real name system

The New Individual Bank Account Circular reiterates that banks must always check the ID information of the account opening applicant, the validity of the ID document, the consistency of the account opening applicant with the ID and the intention of the account opening applicant, and shall under no circumstances open bank accounts with anonymous names or disguised names.

Deadline for implementation

The New Individual Bank Account Circular requires that banks identify and mark the three categories of individual bank accounts and make a filing with the RMB settlement system before April 1, 2016.

Assessment of Implications

The ability of opening an account online or that of remote account opening is at the heart of the direct banking which is supposed to have no physical premises and counters. The New Individual Bank Account Circular represents a giant step of the PRC regulatory development on this issue for the first time by expressly permitting individual account opening through E-channels and using biometric technology as the supplemental method for customer identification.

However, we believe this is just the first step of a long journey towards online-only banks as there are many issues presented by this New Individual Bank Account Circular that will need to be addressed for online-only banks. For example, it is required that bank employees conduct the customer identification check for the opening of Type I Bank Account, which means that online-only banks can only open Type II Bank Account and Type III Bank Account offering limited service types with restricted payment or balance amount. Another example is, the New Individual Bank Account Circular requires that Type II Bank Account to be opened through E-channels must be linked to a Type I Bank Account of the same customer for the purpose of customer identification and such linkage will depend on the willingness of the account bank of such Type I Bank Account to confirm the identity either through PBOC’s Bulk Electronic Payment System or through other means, without which, Type II Bank Account may not be able to be opened electronically. In connection with this, we also note that the New Individual Bank Account Circular provides for a seven-day response period which will inevitably affect the customer’s user experience in account opening. Further, existing regulations require face-to-face risk management before WMP could be sold for the first time. Whether such requirement could be waived or compromised for online-only banks is yet to be seen.

(This article was originally written in Chinese, and the English version is a translation.)

Note: This article was simultaneously published on Chinalawinsight.com

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