World News – United States – China publishes draft rules for online microcredit

Tuesday, 03 Nov2020

The People’s Bank of China (PBOC) and China Banking and Insurance Regulatory Commission (CBIRC) draft rules aim to raise the bar for micro-lenders to provide loans online directly to consumers or jointly with banks, while limiting the amount they can lend

BEIJING: China’s central bank and regulators on Monday released draft rules to strengthen oversight of online micro-credit as it tries to curb rising debt levels in the economy hit by the coronavirus

The People’s Bank of China (PBOC) and China Banking and Insurance Regulatory Commission (CBIRC) draft rules aim to raise the bar for micro-lenders to provide loans online directly to consumers or jointly with banks, while limiting the amount they can lend

Regulators are focusing more on banks that heavily use micro-lenders or third-party technology platforms like Ant Group to underwrite consumer loans, amid fears of an increase in defaults and bankruptcy. deteriorating asset quality Chinese bank consumer loans from tech companies reached 143 trillion yuan ($ 213 71 billion) at end-June, according to PBOC

The draft, which is open for public comment until December 2, established a new requirement for small online lenders to provide at least 30% of any loan they jointly fund with banks

They also set a share capital threshold of 5 billion yuan for micro-lenders who offer loans online in different regions The current threshold varies from province to province but is well below 1 billion yuan

Micro-lenders who obtain borrower data from e-commerce platforms to assess their credit will be required to share credit information with the central bank, according to the draft rules

Analysts expected banks to become more cautious about granting joint loans with fintech lenders to consumers

Guo Wuping, head of CBIRC’s consumer protection division, said in a comment on Monday that the rights of users of consumer loan companies owned by Ant, Huabei and Jiebei deserve careful consideration. Guo said that these fintech lending companies are effectively performing the functions of banks and should adopt similar risk controls

Licenses for eligible lenders will be renewed every three years, according to the draft rules, which state that regulators will in principle not approve new micro-lenders who lend online in all regions

Lenders will have 12 months to comply with the new rules once they are official (USD 1 = 66,914 Chinese yuan) – Reuters

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