Three departments: commercial banks and high-quality real estate enterprises are allowed to carry out the guarantee replacement pre-sale regulatory capital business line of no more than 30%

November 14, Zhonghuanet Finance and Economics News: Zhonghuanet Finance and Economics learned from the official website of the CSRC that today (November 14), the CBRC, the Ministry of Housing and Urban Rural Development and the People's Bank of China jointly issued the Notice on Commercial Banks Issuing Letters of Guarantee to Replace Pre sale Regulatory Funds (hereinafter referred to as the Notice).

The Notice clearly mentioned that in order to support high-quality real estate enterprises to reasonably use pre-sale regulatory funds, prevent and resolve liquidity risks of real estate enterprises, and promote the steady and healthy development of the real estate market, the CBRC, the Ministry of Housing and Urban Rural Development and the People's Bank of China jointly issued the Notice on Commercial Banks Issuing Guarantees to Replace pre-sale regulatory funds (hereinafter referred to as the "Notice") to guide commercial banks to issue letters of guarantee to high-quality real estate enterprises to replace pre-sale regulatory funds in accordance with the principles of marketization and rule of law.

(Related data drawing)

The Notice points out that after the funds in the supervision account reach the supervision limit specified by the housing and urban and rural construction department, the real estate enterprise can apply to the commercial bank to issue a letter of guarantee to replace the funds in the supervision limit. Commercial banks can make independent decisions on the basis of fully evaluating the credit risk, financial status, reputation risk, etc. of real estate enterprises according to the principles of marketization and rule of law, and carry out guarantee replacement pre-sale supervision fund business with high-quality real estate enterprises.

The issuance and implementation of the Notice will help high-quality real estate enterprises ease liquidity pressure, stabilize real estate market expectations, and promote the steady and healthy development of the real estate market. In the next step, the CBRC, the Ministry of Housing and Urban Rural Development and the People's Bank of China will closely communicate and cooperate, jointly implement the Notice, and guide commercial banks to carry out the guarantee replacement pre-sale regulatory capital business in accordance with the law.

It is worth mentioning that the letter of guarantee can only be used to replace the funds within the supervision limit of the pre-sale capital supervision account established in accordance with the law and regulations. The replacement amount shall not exceed 30% of the amount of funds required to ensure project completion and delivery in the supervision account, and the replaced supervision fund shall not be less than 70% of the amount of funds required to ensure project completion and delivery in the supervision account. When the funds within the supervision limit are allocated and used, the guarantee amount shall be reduced accordingly to ensure that the funds in the supervision account are always not less than 70% of the funds required for project completion and delivery. If the real estate enterprise fails to make up the difference funds in the supervision account, the guarantee amount shall not be adjusted.

The three departments require commercial banks to reasonably determine the guarantee period to ensure that it matches the project construction cycle. A commercial bank with a regulatory rating of 4 or below or an asset scale of less than 500 billion yuan shall not carry out the business of replacing and preselling regulatory funds with letters of guarantee. A commercial bank shall not issue a letter of guarantee to a real estate enterprise that is the main shareholder, controlling shareholder or related party of the bank to replace the pre-sale supervision fund. Non bank financial institutions such as financial companies of enterprise groups shall not issue letters of guarantee to replace pre-sale regulatory funds.

Zhonghuanet Finance and Economics learned that the reporter of the Associated Press of Finance learned from the Beijing Banking and Insurance Regulatory Bureau that it recently issued a notice requiring banks and China Sinosure's business institutions in Beijing to further play the role of policy based export credit insurance policy financing and credit enhancement, do a good job in foreign trade enterprise rescue services, and promote high-quality foreign trade and economic development related policy requirements. All banks carrying out policy financing business shall, as required, submit the relevant business data of export credit insurance policy financing to the Beijing Banking and Insurance Regulatory Bureau within 10 days after the end of each quarter. Export credit insurance policy financing is an effective means to help enterprises ease the problem of difficult and expensive financing.

The following is the original text of the Notice on Relevant Work of Commercial Banks Issuing Guarantees to Replace Pre sale Supervision Funds issued by the CBRC on November 12:

Notice of the General Office of the Ministry of Housing and Urban Rural Development of the General Office of the China Banking and Insurance Regulatory Commission and the General Office of the People's Bank of China on the work of commercial banks issuing letters of guarantee to replace pre-sale regulatory funds

Yin Bao Jian Ban Fa [2022] No. 104

To all the banking and insurance supervision bureaus, the housing and urban and rural construction departments (committees, management committees, bureaus) of all provinces, autonomous regions, municipalities directly under the Central Government and Xinjiang Production and Construction Corps, the Shanghai headquarters of the People's Bank of China, all branches, business management departments, central branches in provincial capitals (capitals), central branches in sub provincial cities, major banks, joint-stock banks, and foreign-funded banks:

In order to clarify the requirements for commercial banks to issue letters of guarantee to replace pre-sale regulatory funds, support high-quality real estate enterprises to use pre-sale regulatory funds reasonably, prevent and resolve liquidity risks of real estate enterprises, and promote the steady and healthy development of the real estate market, the relevant matters are hereby notified as follows:

1、 Commercial banks are allowed to make independent decisions on the basis of fully assessing the credit risk, financial status, reputation risk, etc. of real estate enterprises according to the principles of marketization and rule of law, and carry out the business of replacing pre-sale regulatory funds with guarantee with high-quality real estate enterprises.

2、 The letter of guarantee can only be used to replace the funds within the supervision limit of the pre-sale capital supervision account established according to law and compliance. Real estate enterprises should open a supervision account for pre-sale funds in accordance with the provisions of the Opinions on Regulating the Supervision of Commercial Housing pre-sale Funds (Jian Fang [2022] No. 16). The deposit and down payment paid by the buyer, mortgage loans issued by commercial banks and other forms of housing purchase funds and other commercial housing pre-sale funds should be directly deposited into the supervision account. After the funds in the supervision account reach the supervision limit specified by the housing and urban and rural construction department, the real estate enterprise can apply to the commercial bank to issue a letter of guarantee to replace the funds in the supervision limit, and the replacement amount of the letter of guarantee shall not exceed 30% of the amount of funds required in the supervision account to ensure the completion and delivery of the project, The replaced supervision funds shall not be less than 70% of the amount of funds required to ensure the completion and delivery of the project in the supervision account.

3、 When the funds within the supervision limit are allocated and used, the opening bank of the supervision account for pre-sale funds (hereinafter referred to as the supervision account bank) shall notify the bank issuing the letter of guarantee of the relevant information within three working days, and the issuing bank shall urge the real estate enterprise to make up the difference funds to the supervision account (the allocated funds × the proportion of the letter of guarantee replacing the pre-sale supervision funds), and the amount of the letter of guarantee shall be reduced accordingly, Ensure that the funds in the supervision account are always not less than 70% of the amount of funds required for project completion and delivery. If the real estate enterprise fails to make up the difference funds in the supervision account, the guarantee amount shall not be adjusted.

4、 Commercial banks should reasonably determine the guarantee period to ensure that it matches the project construction cycle. After the completion and delivery of the project or the cancellation of the pre-sale capital agreement for the first registration of the ownership of the commercial housing project, the letter of guarantee shall become invalid accordingly.

5、 A commercial bank with a regulatory rating of 4 or below or an asset scale of less than 500 billion yuan shall not carry out the business of replacing and preselling regulatory funds with letters of guarantee. A commercial bank shall not issue a letter of guarantee to a real estate enterprise that is the main shareholder, controlling shareholder or related party of the bank to replace the pre-sale supervision fund. Non bank financial institutions such as financial companies of enterprise groups shall not issue letters of guarantee to replace pre-sale regulatory funds.

6、 When issuing letters of guarantee to replace pre-sale regulatory funds, commercial banks should fully assess the credit risk, financial status, reputation risk, project sales prospects and residual value of real estate enterprises by referring to the development loan credit standards, and carry out letters of guarantee replacement pre-sale regulatory funds business with high-quality real estate enterprises with stable operation and good financial status. For projects with complex creditor debtor relationship, more disputes involved in cases and lawsuits, too large amount of external guarantee, and construction progress significantly lower than expected, the letter of guarantee shall be issued prudently. If the project subject is associated with the general contractor, the project risk shall be fully assessed. The guarantee line is fully included in the unified credit line for real estate enterprises and their affiliated groups.

7、 Commercial banks should guard against the risk of letter of guarantee business by means of deposits, counter guarantees of real estate enterprises and other credit enhancement measures, and withdraw risk capital and risk reserves as required.

8、 If a real estate enterprise provides a letter of guarantee issued by a commercial bank and requests the housing and urban and rural construction department to release the corresponding amount of funds in the pre-sale funds supervision account, the supervision account bank shall cooperate with the housing and urban and rural construction department to do the necessary review work. The housing and urban and rural construction department shall issue the appropriation instruction to the regulatory account bank after study and approval. The regulatory account bank shall allocate funds according to the allocation instructions of the housing and urban and rural construction departments, and reduce the amount of account management by an equal amount.

9、 During the validity period of the guarantee, if the remaining funds in the supervision account are not enough to pay for the project, the sending bank shall immediately advance the performance and pay the difference within the guarantee amount after deducting the remaining funds in the account. In case of advance payment, the sending bank shall take recourse measures from the real estate enterprise in time to protect the security of creditor's rights. The advance funds shall be provided in full and classified truthfully, and risks shall not be hidden.

10、 All regions shall not force commercial banks to issue letters of guarantee, and shall not link the issuance of letters of guarantee with the regulatory qualification of local pre-sale funds. The housing and urban and rural construction department and the financial management department should provide necessary support for commercial banks to carry out the guarantee replacement pre-sale regulatory capital business.

11、 The real estate enterprise shall use the pre-sale supervision funds replaced by the letter of guarantee according to the regulations, and give priority to the project construction, repayment of the due debts of the project, and shall not be used to purchase land, add other investments, repay shareholder loans, etc. The real estate enterprise shall undertake the obligation to make up the funds in the supervision account as agreed to ensure that the project construction funds are sufficient.

12、 All localities should strengthen the management of real estate enterprises and seriously investigate and deal with the illegal use of funds by real estate enterprises. If the regulatory account bank and the issuing bank find that the real estate enterprise uses funds in violation of regulations or fails to make up the difference in time after the pre-sale funds are allocated, they shall report to the relevant departments in a timely manner. Housing and urban and rural construction departments and financial management departments can take measures such as joint interviews and administrative penalties to urge real estate enterprises to correct violations.

General Office of CBRC

General Office of the Ministry of Housing and Urban Rural Development

General Office of the People's Bank of China

November 12, 2022

(This document shall be sent to the branch of China Banking and Insurance Regulatory Commission, the central sub branch of the People's Bank of China and the local corporate commercial bank)

key word: CBRC Pre sale regulatory funds