No. 1 Fuxingmen Nei Dajie, Beijing, China, 100818 Tel: (86) 10-6659 6688 Fax: (86) 10-6601 6871 Customer Service and Complaint Hotline: (86) Area Code-95566 http://www.boc.cn Annual Report 2016 Stock Code: 3988 / 4601 2016 Annual Report Ordinary H-Share Stock Code: 3988 Offshore Preference Share Stock Code: 4601 Bank of China Global Network Bank of China is the most internationalised bank in China. After establishing the London Agency in 1929, which was the first overseas institution of Chinese financial institutions, the Bank gradually expanded its overseas network to major global financial centres including Tokyo, Singapore and New York. At present, the Bank provides a comprehensive range of financial services to customers across the Chinese mainland as well as 51 countries and regions. STOCKHOLM MANCHESTER DUSSELDORF GLASGOW HAMBURG MOSCOW DUBLIN BERLIN BIRMINGHAM ROTTERDAM WARSAW LONDON PRAGUE CALGARY FRANKFURT AKTOBE BRUSSELS PARIS KHABAROVSK VANCOUVER VIENNA ALMATY ULAANBAATAR LUXEMBOURG BUDAPEST MUNICH MONTREAL LYON TORONTO MILAN BELGRADE VLADIVOSTOK ROME ISTANBUL CHICAGO NEW YORK LISBON STUTTGART KOBE SEOUL TOKYO ANSAN LOS ANGELES CASABLANCA DAEGU YOKOHAMA OSAKA NAGOYA BAHRAIN DUBAI TAIPEI MACAU HONG KONG ABU DHABI CHIANG MAI VIENTIANE GRAND CAYMAN YANGON KHON KAEN NAKHON RATCHASIMA BANGKOK RANONG MANILA PHNOM PENH HO CHI MINH CITY COLON HAT YAI PENANG KUALA LUMPUR PANAMA MEDAN MUAR BANDAR SERI BEGAWAN KLANG KUCHING NAIROBI PUCHONG JOHOR BAHRU SINGAPORE LUANDA DAR ES SALAAM JAKARTA SURABAYA LIMA KITWE LUSAKA PORT LOUIS RIO DE JANEIRO SAO PAULO JOHANNESBURG BRISBANE DURBAN PERTH ADELAIDE SYDNEY AUCKLAND MELBOURNE STOCKHOLMSTOCKHOLM MANCHESTERMANCHESTER DUSSELDORFDUSSELDORF GLASGOWGLASGOW HAMBURGHAMBURG MOSCOWMOSCOW DUBLINDUBLIN BERLINBERLIN BIRMINGHAMBIRMINGHAMROTTERDAMROTTERDAM WARSAWWARSAW LONDONLONDON PRAGUEPRAGUE CALGARYCALGARY FRANKFURTFRANKFURT AKTOBEAKTOBE BRUSSELSBRUSSELSPARISPARIS KHABAROVSKKHABAROVSK VANCOUVERVANCOUVER VIENNAVIENNA ALMATYALMATY ULAANBAATARULAANBAATAR LUXEMBOURGLUXEMBOURG BUDAPESTBUDAPEST MUNICHMUNICH MONTREALMONTREAL LYONLYON TORONTOTORONTO MILANMILAN BELGRADEBELGRADE VLADIVOSTOKVLADIVOSTOK ROMEROME ISTANBULISTANBUL CHICAGOCHICAGO NEWNEW YORK YORK LISBONLISBONSTUTTGARTSTUTTGART KOBEKOBE SEOULSEOUL TOKYOTOKYO ANSANANSAN LOSLOS ANGELES ANGELES CASABLANCACASABLANCA DAEGUDAEGU YOKOHAMAYOKOHAMA OSAKAOSAKANAGOYANAGOYA BAHRAINBAHRAIN DUBAIDUBAI TAIPEITAIPEI MACAUMACAU HONGHONG KONG KONG ABUABU DHABI DHABI CHIANGCHIANG MAI MAI VIENTIANEVIENTIANE GRANDGRAND CAYMAN CAYMAN YANGONYANGON KHONKHON KAEN KAEN NAKHONNAKHON RATCHASIMA RATCHASIMA BANGKOKBANGKOKRANONGRANONG MANILAMANILA PHNOMPHNOM PENH PENH HO HOCHI CHI MINH MINH CITY CITY COLOCOLON N HATHAT YAI YAI PENANGPENANG KUALAKUALA LUMPUR LUMPUR PANAMAPANAMA MEDANMEDAN MUARMUAR BANDARBANDAR SERI SERI BEGAWAN BEGAWAN KLANGKLANG KUCHINGKUCHING NAIROBINAIROBI PUCHONGPUCHONG JOHORJOHOR BAHRU BAHRUSINGAPORESINGAPORE LUANDALUANDA DARDAR ES SALAAMES SALAAM JAKARTAJAKARTA SURABAYASURABAYA LIMALIMA KITWEKITWE LUSAKALUSAKA PORTPORT LOUIS LOUIS RIO RIODE JANEIRODE JANEIRO SAOSAO PAULO PAULO JOHANNESBURGJOHANNESBURG BRISBANEBRISBANE DURBANDURBAN PERTHPERTH ADELAIDEADELAIDE SYDNEYSYDNEY AUCKLANDAUCKLAND MELBOURNEMELBOURNE Introduction Bank of China was formally established in February 1912 following the approval of Dr. Sun Yat-sen. From 1912 to 1949, the Bank served consecutively as the country’s central bank, international exchange bank and specialised international trade bank. Fulfilling its commitment to serving the public and developing China’s financial services sector, the Bank rose to a leading position in the Chinese financial industry and developed a good standing in the international financial community, despite many hardships and setbacks. After 1949, drawing on its long history as the state-designated specialised foreign exchange and trade bank, the Bank became responsible for managing China’s foreign exchange operations and provided vital support to the nation’s foreign trade development and economic infrastructure by its offering of international trade settlement, overseas fund transfer and other non- trade foreign exchange services. During China’s reform and opening up period, the Bank seized the historic opportunity presented by the government’s strategy of capitalising on foreign funds and advanced technologies to boost economic development, and became the country’s key foreign financing channel by building up its competitive advantages in foreign exchange business. In 1994, the Bank was transformed into a wholly state- owned commercial bank. In August 2004, Bank of China Limited was incorporated. The Bank was listed on the Hong Kong Stock Exchange and the Shanghai Stock Exchange in June and July 2006 respectively, becoming the first Chinese commercial bank to launch an A-Share and H-Share initial public offering and achieve a dual listing in both markets. In 2016, Bank of China was again designated as a Global Systemically Important Bank, thus becoming the sole financial institution from emerging economies to be designated as a Global Systemically Important Bank for six consecutive years. As China’s most internationalised and diversified bank, Bank of China provides a comprehensive range of financial services to customers across the Chinese mainland as well as 51 countries and regions. The Bank’s core business is commercial banking, including corporate banking, personal banking and financial markets services. BOC International Holdings Limited, a wholly owned subsidiary, is the Bank’s investment banking arm. Bank of China Group Insurance Company Limited and Bank of China Insurance Company Limited, both wholly owned subsidiaries, run the Bank’s insurance business. Bank of China Group Investment Limited, a wholly owned subsidiary, undertakes the Bank’s direct investment and investment management business. Bank of China Investment Management Co., Ltd., a controlled subsidiary, operates the Bank’s fund management business. BOC Aviation Limited, a controlled subsidiary, is in charge of the Bank’s aircraft leasing business. Bank of China has upheld the spirit of “pursuing excellence” throughout its history of over one century. With adoration of the nation in its soul, integrity as its backbone, reform and innovation as its path forward and “people first” as its guiding principle, the Bank has built up an excellent brand image that is widely recognised within the industry and by its customers. Faced with new historic opportunities, the Bank will meet its social responsibilities, strive for excellence, and make further contributions to achieving the China Dream and the great rejuvenation of the Chinese nation. 1 2016 Annual Report Development Strategy Core Values Pursuing excellence Integrity Performance Responsibility Innovation Harmony Strategic Goal Serving Society, Delivering Excellence Overall Requirements of the Development Strategy To build Bank of China into an excellent bank driven by the pursuit of noble values, a bank that shoulders significant responsibility for the nation’s revival, a bank that possesses a competitive edge in the globalisation process, a bank that leads lifestyle changes through technological innovations, a bank that earns customer loyalty through market competition and a bank that meets the expectations of shareholders, employees and society in the course of its sustained development. 2016 Annual Report 2 Contents 4 Definitions 5 Important Notice 6 Honours and Awards 7 Financial Highlights 10 Corporate Information 11 Message from the Chairman 15 Message from the President 19 Message from the Chairman of the Board of Supervisors 21 Management Discussion and Analysis 21 — Financial Review 37 — Business Review 62 — Risk Management 72 — Organisational Management, Human Resources Development and Management 74 — Outlook 75 Corporate Social Responsibilities 78 Changes in Share Capital and Shareholdings of Shareholders 84 Directors, Supervisors and Senior Management Members 103 Corporate Governance 119 Report of the Board of Directors 126 Report of the Board of Supervisors 130 Significant Events 132 Independent Auditor’s Report 137 Consolidated Financial Statements 294 Reference for Shareholders 297 Organisational Chart 299 List of Major Branches and Subsidiaries 3 2016 Annual Report Definitions In this report, unless the context otherwise requires, the following terms shall have the meaning set out below: The Bank/the Group Bank of China Limited or its predecessors and, except where the context otherwise requires, all of the subsidiaries of Bank of China Limited Articles of Association The performing Articles of Association of the Bank A Share Domestic investment share(s) in the ordinary share capital of the Bank, with a nominal value of RMB1.00 each, which are listed on SSE (Stock Code: 601988) Basis Point (Bp, Bps) Measurement unit of changes in interest rate or exchange rate. 1 basis point is equivalent to 0.01 percentage point BOC Aviation BOC Aviation Limited, a public company limited by shares incorporated in Singapore under the Singapore Companies Act, the shares of which are listed on the Hong Kong Stock Exchange BOC Insurance Bank of China Insurance Company Limited BOC Life BOC Group Life Assurance Co., Ltd. BOCG Insurance Bank of China Group Insurance Company Limited BOCG Investment Bank of China Group Investment Limited BOCHK Bank of China (Hong Kong) Limited, an authorised financial institution incorporated under the laws of Hong Kong and a wholly-owned subsidiary of BOCHK (Holdings) BOCHK (Holdings) BOC Hong Kong