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However, due to the unfinished reform, today’s Chinese banking structure might be the most complex one in this world. There coexist four dominant biggest state-owned commercial banks, over one hundred city commercial banks (the business is limited in a given city and the owners are local governments and private sectors), thousands of urban and rural credit cooperatives (owned by local collective sectors), twelve national and regional joint stock banks, one national postal savings, and over a hundred foreign joint venture or sole foreign-invested banks. The following discussions of the bank and customer relationship will start from the relevant definitions in both jurisdictions, and then shall analyze the nature of this relationship and the duties of both sides. The Chinese part of comparison shall be deemed as basic rules applied to present banking business. Some of them may not apply to foreign-invested banks, which services subject to specific regulations.
2. Definitions of Bank and Banking Business
It is interesting that the definitions of bank are separated from the banking business in both jurisdictions. This is meant a bank must be an institution taking banking business but an institution taking banking business may not be named as a bank. Both the jurisdictions has recognized the existence of divers financial institutions and the importance of ‘general prohibition’, so whatever the name, anyone undertaking ‘accepting deposits’ should be authorized (by the Financial Service Authority in the UK; by the People’s Bank in China).
In China there are statutory definitions of banks and banking business to distinguish banks and their business from other financial institutions. Commercial banks was defined as ‘legal persons that are established in conformity with this Law and the Company Law of the PRC and that take in deposits from the general public, grant loans, handle settlements, etc’. No unit or individual may engage in commercial banking business such as taking in deposits from the general public, and no unit may use the word ‘bank’ in its name, without approval of the People''s Bank. Any institutions, including credit cooperatives and postal savings, handling business as ‘deposits, loans, and settlements [clearing]’, shall apply the relevant provisions of this Law. In terms of banking business, commercial banks may engage in 12 traditional operations, and no commercial banks may engage in trust investment or share business, or invest in real estate which is not for their own use; no commercial banks may invest in non-banking financial institutions or enterprises.
In the UK, separate Acts define a ‘bank’ for their specific purpose. A bank’s business may cover all financial service sectors. A coincidence was that the Chinese financial chaos and the closure of BCCI (in 1992) and collapse of Barings Bank (in 1995) in the UK happened in the same period. While Chinese legislators found the People’s Bank was lack of ability to govern the whole financial service market and decided to separate banking from other financial services, the UK’s legislature adopted a different approach in the Financial Service and Market Act 2000, which established, one of the most powerful financial regulators in the world, the FSA, to control the whole financial services. For doing so, the FSMA 2000 imposes ‘general prohibition’ on anyone carrying on ‘regulated activity in the UK’ and only ‘authorised persons’ or ‘exempt persons’ may undertake such activity. It is not yet necessary to distinguish banks from other financial services in the UK, so nor is the distinguishable definition of bank necessary. In general, while the multifunctional banking business in the UK is regulated by the FSMA 2000, the entire Chinese financial services are separately governed by several statutes, enacted after the period of chaos, namely Law of Commercial Banks, Law of Insurance, Law of Securities, and Law of Trust Investments.
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