Bancassurance Regulatory Commission: strengthening the supervision of micro-loan companies shall not be used for illegal financing in the real estate market

Published: Sep 17, 2020 08:26 (GMT+8)
[Bancassurance Regulatory Commission: strengthening the supervision of microfinance companies shall not be used for illegal financing in the real estate market] on September 16, in order to standardize the business behavior of microfinance companies, prevent and defuse related risks, and promote the healthy development of the industry, the General Office of the Bancassurance Regulatory Commission recently issued a notice on strengthening the supervision and management of microfinance companies.

SMM: in order to standardize the business behavior of micro-loan companies, prevent and defuse related risks, and promote the healthy development of the industry, the General Office of the Bancassurance Regulatory Commission recently issued a notice on strengthening the supervision and management of micro-loan companies.

The notice mainly includes the following contents: first, standardize the business operation and improve the service ability. This paper puts forward requirements in the business scope of micro-loan companies, the proportion of external financing, the amount of loans, the use of loans, business areas, loan interest rates and so on. The second is to improve operation and management and promote healthy development. It should be regulated from the aspects of fund management, collection management, information disclosure, custody of customer information, active cooperation with supervision and so on. The third is to strengthen supervision and management and rectify the order of the industry. Guide all localities to clarify supervision responsibilities, improve supervision measures, build supervision teams, implement classified supervision, and increase penalties. The fourth is to increase support and create a good environment. Encourage the strengthening of policy support, bank cooperation support, strengthen industry self-discipline, and promote the sustainable development of the industry.

In the next step, the Banco Insurance Regulatory Commission will continue to strengthen the construction of the supervision system of the micro-loan company industry, link up with the implementation of the regulations on non-deposit lending organizations, and further improve the operating rules and regulatory rules of the micro-loan company industry.

Among them, micro-loan companies should mainly engage in lending business. Micro-loan companies with good operation and management, strong risk control ability and good supervision and evaluation, with the approval of the local financial regulatory department, may carry out business such as issuing bonds, issuing asset securitization products based on loans issued by the company, shareholder loans and so on.

Micro-loan companies shall follow the principle of small and decentralized loans, and reasonably determine the amount and duration of loans according to the borrower's income level, overall liabilities, assets, actual demand and other factors, so that the repayment amount of the borrower does not exceed its repayment ability. The loan balance of a microfinance company to the same borrower shall not exceed 10% of the net assets of the microfinance company, and the loan balance to the same borrower and its associated parties shall not exceed 15% of the net assets of the microfinance company. Local financial regulatory departments may, according to regulatory needs, lower the maximum amount of loan balance mentioned above.

In addition, the balance of funds incorporated into micro-loan companies through non-standardized financing forms such as bank loans and shareholder loans shall not exceed 1 times of their net assets; the balance of funds incorporated into funds in the form of standardized debt assets such as bonds and asset securitization products shall not exceed 4 times their net assets.

A small loan company shall clearly agree on the use of the loan with the borrower and monitor the use of the loan in accordance with the contract, which shall comply with laws and regulations, national macro-control and industrial policies. Loans from micro-loan companies shall not be used for the following matters: investments such as stocks and financial derivatives; illegal financing in the real estate market; and other uses prohibited by laws and regulations, the CBRC and local financial regulatory authorities.

A small loan company shall not first deduct interest, service fee, management fee, deposit, etc., from the principal of the loan. If it violates the rule of deduction in advance, it shall repay the loan and calculate the interest rate according to the actual amount of the loan after deduction. Encourage microfinance companies to lower loan interest rates and reduce financing costs in the real economy.

A small loan company shall not engage in the following acts: absorbing or absorbing public deposits in a disguised form; selling or transferring its credit assets other than non-performing credit assets through the Internet platform or various local trading venues; issuing or acting for the sale of financial management, trust plans and other asset management products; other acts prohibited by laws and regulations, the CBRC and local financial regulatory departments.

According to the person in charge of the relevant departments of the Bancassurance Regulatory Commission, by the end of December 2019, there were 9074 legal institutions of micro-loan companies across the country, with paid-in capital of 947.8 billion yuan and loan balance of 1.0043 trillion yuan. The notice stipulates some of the operating rules and regulatory rules that are urgently needed in the micro-loan company industry, which is conducive to curbing regulatory arbitrage, promoting standardized supervision, and promoting the healthy development of the industry.

The responsible person of the relevant departments of the Bancassurance Regulatory Commission believes that the formulation of the notice follows the following principles: first, encourage return to the origin, focus on the main business, and serve the real economy. It is clear that micro-loan companies should mainly engage in lending business, and regulate it from the aspects of loan concentration, loan use, business area and so on. Guide the micro-loan company industry to improve the service level of small and micro enterprises, farmers, urban low-income groups and other key inclusive financial services. The second is to emphasize the supervision after the event and the negative list management. In the case that the superior administrative regulations have not yet been issued, in line with the idea of problem-oriented, emergency first and gradual improvement, emphasize the supervision after the event, and clarify the regulatory rules that urgently need to be unified in the industry. Adhere to the bottom line thinking, strictly prohibit touching the illegal high-voltage line, prevent risk spillover, and keep the risk bottom line. Third, we should pay attention to giving full play to the subjective initiative of local financial supervision. Dialectically grasp the principle and flexibility of regulatory rules, reduce unnecessary unified regulatory restrictions, and authorize local financial supervision bureaus to refine some regulatory requirements in the light of local realities.

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