China Launches $42 Billion Share Repurchases & Increases in Holdings Program at Maximum Interest of 2.25% for Listed-Companies & Key Shareholders to Fund Share Purchases, 21 Lenders Include Agricultural Development Bank of China, Export-Import Bank of China, China Development Bank & Postal Savings Bank of China, Applicants Need to Open New Securities Accounts
19th October 2024 | Hong Kong
China has launched the $42 billion (CNY 300 billion) share repurchases & increases in holdings program at maximum interest of 2.25% for listed-companies & key shareholders to fund share purchases. The 21 lenders in the program include Agricultural Development Bank of China, Export-Import Bank of China, China Development Bank & Postal Savings Bank of China. Applicants need to open new securities accounts. The program was announced by the People’s Bank of China (PBOC), China Securities Regulatory Commission (CSRC) and the National Financial Regulatory Administration. See below for full statement:
“ China Launches $42 Billion Share Repurchases & Increases in Holdings Program at Maximum Interest of 2.25% for Listed-Companies & Key Shareholders to Fund Share Purchases, 21 Lenders Include Agricultural Development Bank of China, Export-Import Bank of China, China Development Bank & Postal Savings Bank of China, Applicants Need to Open New Securities Accounts “
17th Oct 2024 – Circular of the People’s Bank of China General Administration of Financial Supervision of the China Securities Regulatory Commission on Matters Relating to the Establishment of Refinancing for Share Repurchases and Increases in Holdings
China Development Bank, policy banks, state-owned commercial banks, China Postal Savings Bank, joint-stock commercial banks:
In order to implement the decision-making and deployment of the CPC Central Committee and the State Council, to establish a long-term mechanism to enhance the inherent stability of the capital market, to further safeguard the stable operation of the capital market, and to boost the confidence of the market, the People’s Bank of China has established a stock repurchase and increase the holding of the refinancing loan, to guide the financial institutions to provide loans to the listed companies and the major shareholders, and to adhere to the “special funds for special purpose, closed operation The loan funds adhere to the “dedicated funds, closed operation”, respectively, to support its repurchase and holdings of listed companies, and to promote the listed companies to actively use the repurchase, shareholders holdings and other tools for market value management. The relevant matters are notified as follows:
I. Repurchase of Shares by Listed Companies and Increase in Shareholdings by Major Shareholders
(i) Conditions and scope of listed companies and major shareholders. The repurchase of shares by listed companies and the increase of shareholdings by major shareholders may be included in the scope of policy support if the following basic conditions are met:
1. Basic conditions for share repurchase by listed companies. The listed company shall meet the conditions set forth in Article 8 of the Rules for Share Repurchase by Listed Companies (China Securities Regulatory Commission Announcement [2023] No. 63) and is not a company that has been subject to a delisting risk warning. The listed company shall disclose the repurchase program.
2. Basic conditions for major shareholders to increase their shareholdings. Increase in shareholding by major shareholders refers to the purchase of shares of a listed company by major shareholders through centralized bidding. The listed company whose major shareholders increase their holdings shall not be a company that has been subject to the delisting risk warning. In principle, major shareholders shall be shareholders holding more than 5% of the shares of the listed company, have the ability to fulfill debts and have not committed any major illegal acts in the recent year. Major shareholders should disclose their plans to increase their holdings.
3. Treat listed companies of different ownership systems equally. Centralized enterprises are encouraged to play a leading role.
(ii) Open separate dedicated securities accounts. Listed companies and major shareholders applying for the loan shall open a separate dedicated securities account exclusively for the purpose of share repurchase and share increase. Only one fund account is allowed to be opened in the dedicated securities account, and the lending institution should be selected as the third-party depository bank. The dedicated securities account shall not be subject to transfer of custody or transfer of designation procedures. If the opening of a dedicated securities account is inconsistent with the current regulations, exemptions may be granted from the implementation of the relevant regulations.
II. Issuance of loans by financial institutions for stock repurchase and increase in holdings
(i) 21 national financial institutions may issue loans for stock repurchase and increase in holdings. Eligible listed companies and major shareholders may apply for loans from 21 national financial institutions (hereinafter referred to as the 21 financial institutions), including China Development Bank, policy banks, state-owned commercial banks, China Postal Savings Bank and joint-stock commercial banks. The financial institutions shall, in accordance with the market-oriented principle, independently issue loans to eligible listed companies and major shareholders, specifically for the purpose of repurchasing and increasing the holdings of listed companies (hereinafter referred to as the loans for repurchasing and increasing the holdings of shares).The loans for repurchasing and increasing the holdings of shares issued by the 21 financial institutions in accordance with the provisions of this Circular shall be exempted from the implementation of the regulatory provisions, if they are inconsistent with the “Credit Funds Shall Not Flow Into the Stock Market”. If the loans issued by the 21 financial institutions in accordance with the provisions of this Circular are inconsistent with the relevant regulatory provisions such as “credit funds shall not flow into the stock market”, they shall be exempted from the implementation of the relevant regulatory provisions.
(ii) Strictly determining the conditions of the loans, 21 financial institutions, in accordance with the principles of marketization and rule of law, in compliance with the law and risk control, independently decide on the conditions for granting loans and whether to grant loans, at their own risk, to ensure commercial sustainability. The issuance of loans shall be incorporated into the unified credit granted to listed companies on the premise that they have formally disclosed their repurchase programs or shareholders’ shareholding increase plans; the amount of the loan shall not be higher than a certain percentage of the funds for repurchase and increase of shareholding. In accordance with the principle of preferential interest rates, the loan interest rate shall be reasonably determined, in principle not exceeding 2.25%, and exempted from the self-regulatory agreement on interest rates.
(C) strict management of loan funds. To ensure that the loan funds are “earmarked for specific purposes and operated in a closed manner”, the 21 financial institutions shall open special bank loan accounts for listed companies and major shareholders, and at the same time open fund accounts corresponding to the aforesaid special securities accounts. 21 financial institutions shall issue the loans to the fund accounts, and supervise the listed companies and major shareholders to ensure that the loan funds are used for the repurchase and increase of holdings of shares. Repurchase and increase of holdings. The fund account is not allowed to withdraw cash or transfer money to the outside world until the loan is fully settled.
(d) Improvement of internal control measures The 21 financial institutions shall, in accordance with the principle of giving priority to internal control and system first, establish and improve relevant systems and internal control measures, formulate policies, standards and procedures for loans for stock repurchase and increase in holdings, set up special loan products and statistical subjects, specify the repayment sources and conditions for issuance of qualified pledges, and strengthen risk management of the relevant business.
(e) Establishment of an information communication linkage mechanism. 21 financial institutions and the People’s Bank of China, the State Administration of Financial Supervision and Administration, China Securities Regulatory Commission timely synchronization of relevant information. 21 financial institutions before granting the loan, should timely copy the loan object, the amount, the term, the interest rate, the use of the loan, and other relevant information to the People’s Bank of China, the State Administration of Financial Supervision and Administration, China Securities Regulatory Commission.
Third, the People’s Bank of China issued stock repurchase and increase refinance loans
(A) the basic elements of refinancing. 21 financial institutions in accordance with the provisions of this notice to the listed companies and major shareholders to issue stock repurchase and holdings of loans, can apply to the People’s Bank of China for refinancing. The total amount of the first installment of the refinancing is RMB 300 billion, with an annual interest rate of 1.75% and a term of 1 year, which may be extended as appropriate.
(ii) Refinancing issuance process. The refinancing is issued on a quarterly basis, and 21 financial institutions apply for refinancing to the PBOC with official documents by the 10th day of the first month of each quarter (postponed in case of holidays), and submit the relevant loan accounts and related materials issued in the previous quarter. The People’s Bank of China, in conjunction with the China Securities Regulatory Commission, will review the application materials and, for loans that meet the requirements, issue refinancing loans to 21 financial institutions at 100% of the loan principal.
(iii) Requirements on pledges for refinancing loans: 21 financial institutions are required to provide the PBOC with qualified bonds or credit assets that have been rated internally by the Central Bank as pledges.
IV. Strengthening Supervision and Management
The People’s Bank of China, together with the State-owned Assets Supervision and Administration Commission of the State Council, the State Financial Supervision and Administration Bureau, and the China Securities Regulatory Commission, has established a supervision and management mechanism to supervise the 21 financial institutions to realize the “earmarked funds for special purpose and closed operation”, and to do a good job in supporting the work of stock repurchase and increase in holdings.
The China Securities Regulatory Commission urged listed companies and major shareholders to open separate special securities accounts specifically for stock repurchases and holdings; supervised and oversaw the repurchases by listed companies and holdings by major shareholders; and verified and confirmed the repurchases by listed companies and holdings by major shareholders. The State Administration of Financial Supervision and Administration of the People’s Republic of China shall supervise and administer the issuance of loans by 21 financial institutions in accordance with the provisions of this Circular for the purpose of repurchase of shares by listed companies and increase of shareholdings by major shareholders, and supervise the inflow of credit funds other than those exempted by this Circular into the stock market. The People’s Bank of China strengthens the supervision and management of the use of refinancing funds, and may, depending on the seriousness of the situation, take measures to recover the refinancing funds, disqualify the participation in structural monetary policy tools and other measures to deal with the problems.
This policy is a phased arrangement. Financial institutions that are not within the scope of support of this policy strictly implement the existing regulatory provisions.
People’s Bank of China
General Administration of Financial Supervision
China Securities Regulatory Commission
October 17, 2024
China Launches $42 Billion Share Repurchases & Increases in Holdings Program at Maximum Interest of 2.25% for Listed-Companies & Key Shareholders to Fund Share Purchases, 21 Lenders Include Agricultural Development Bank of China, Export-Import Bank of China, China Development Bank & Postal Savings Bank of China, Applicants Need to Open New Securities Accounts
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