After half a year, China Banking and Insurance Regulatory Commission further standardized the Internet loan business of commercial banks.
On February 20th, China Banking and Insurance Regulatory Commission, China issued the Notice on Further Regulating the Internet Loan Business of Commercial Banks (hereinafter referred to as the Notice), which set three restrictive quantitative indicators for the Internet loan business of commercial banks, and made it clear that local corporate banks are not allowed to carry out Internet loan business across registered jurisdictions. In July 2020, China Banking and Insurance Regulatory Commission issued the Interim Measures for the Administration of Internet Loans of Commercial Banks (hereinafter referred to as the Measures).
These three quantitative indicators are:proportions of contributionsThat is, commercial banks and cooperative institutions jointly contribute to the issuance of loans. In a single loan,The investment proportion of the partners shall not be less than 30%.;Concentration indexThat is, the balance of the bank’s loans issued by a commercial bank and a single partner shall not exceed 25% of the net Tier 1 capital;Quota indexThat is, the balance of internet loans jointly funded by commercial banks and all cooperative institutions shall not exceed 50% of the total loan balance.
"In accordance with the principle of prudential supervision, this Notice has formulated more perfect rules for the contents of the Measures, which can effectively curb the rapid expansion of Internet loans." Su Xiaorui, a financial technology expert, said.
Dong Ximiao, chief researcher of Zhaolian Finance and part-time researcher of Fudan University Financial Research Institute, also said that the Notice greatly tightened the requirements of the Internet loan policy and was a further refinement and revision of the Measures. The main purpose is to implement a series of requirements of the central government on regulating the development of financial technology and platform economy, further strengthen financial supervision and better prevent financial risks.
Ceng Gang, director of the National Finance and Development Laboratory, told the The Paper that the further regulation of the Notice is mainly in two aspects: one is to control the cross-regional operation of small and medium-sized banks, and the other is to further clarify the possible risks of both parties in joint loan cooperation, while limiting the leverage of the partners and the concentration of banks, so as to reduce the different financial risks that may be brought to both parties in joint loans.
Set the proportion of capital contribution：Restrict the leverage of partners
Regarding the requirement that the proportion of the partner’s capital contribution in a single loan should not be less than 30%, the person in charge of the relevant departments in China Banking and Insurance Regulatory Commission said that in practice, some banks have weak credit risk management and are not right with the partner’s rights and responsibilities, which has damaged the foundation of the healthy and sustainable development of the Internet loan business. This standard is determined according to the actual situation of Internet loan business of commercial banks, through full investigation and calculation, and at the same time, it is consistent with the relevant provisions of the Interim Measures for the Administration of Internet Microfinance Business (Draft for Comment) to avoid regulatory arbitrage.
Ceng Gang believes that in joint loans, the proportion of cooperative institutions’ investment is too small and the bank’s investment is too high, which means that cooperative institutions will overuse leverage. If the cooperative institution itself is also a financial institution, it will lead to its own high risk.
Therefore, Ceng Gang believes that the requirement of "the contribution ratio of the partners shall not be less than 30%" is mainly to avoid the systemic risk caused by the excessive leverage ratio of the joint loan partners.
Chen Wen, director of the Digital Economy Research Center of the School of Finance of Southwestern University of Finance and Economics, mentioned that only after the partners provide a certain proportion of capital contribution can banks truly grasp the risk control and reduce the risks borne by commercial banks, which is also aimed at the reality that the actual risk control of banks is completely grasped by external partners in the joint loan model.
Set concentration and quota indicators: disperse the risk of joint loans and prevent risk contagion.
The Notice clarifies the quantitative standards for concentration risk management and quota management. On the one hand, commercial banks and cooperative institutions jointly contribute to the issuance of loans, and the balance of loans issued by the bank with a single partner shall not exceed 25% of the bank’s net Tier 1 capital. On the other hand, the balance of Internet loans jointly funded by commercial banks and cooperative institutions shall not exceed 50% of the total loan balance of the Bank.
In fact, in order to prevent the risks of cooperative institutions from spreading to the banking system, the Measures issued last year have put forward the requirements for commercial banks to carry out internet loans and the concentration management of cooperative institutions. However, in practice, there are differences in the understanding and grasp of the above provisions among commercial banks, and the concentration management and quota management of individual institutions have failed.
The person in charge of the relevant departments in China Banking and Insurance Regulatory Commission said that the above provisions can not only promote commercial banks to further realize the moderate decentralization of Internet loan business, but also avoid the concentration risk of over-reliance on a single cooperative institution, and at the same time fully reserve space for the healthy development of Internet loan business.
"From the bank’s own point of view, if the joint loan provided by a joint loan cooperative institution accounts for too high a proportion of the bank’s loans, or the Internet loan accounts for too high a proportion of the loans, it may lead to the concentration risk of the bank. If there is a problem with the partner or there is a problem with the Internet loan, the bank’s loan risk will be high." Ceng Gang said.
Chen Wen also mentioned that if the risk control of a single partner is not solid, it is likely to pass the risk to the bank.
Dong Ximiao also said that strengthening the concentration management of cooperative institutions is mainly to spread the risk of joint loans and prevent small and medium-sized banks from "putting eggs in the same basket" and relying too much on a single external partner. He also mentioned that the quota index is mainly to control the risk of Internet loans from the total amount and avoid the disorderly growth of Internet loans. "This has little impact."
Prohibit local banks from operating across regions.
The "Notice" stipulates that cross-regional operations should be strictly controlled, and it is clear that local corporate banks that carry out Internet loan business should serve local customers and may not carry out Internet loan business across registered jurisdictions. There are no physical business outlets, and the business is mainly carried out online, except that it meets other requirements stipulated by China Banking and Insurance Regulatory Commission.
The person in charge of the relevant departments in China Banking and Insurance Regulatory Commission pointed out that in recent years, some local banks have used Internet technology to expand their business areas, which seriously deviated from their positioning and expanded blindly and disorderly, bringing great risks. The Notice further clarifies and strictly controls the cross-regional operation of Internet loans. At the same time, the Notice also fully considers the actual situation of some institutions, and exempts institutions that have no physical business outlets, mainly conduct business online, and meet other regulatory requirements.
Su Xiaorui believes that this Notice is conducive to clarifying the business boundaries of local legal persons from the source and guiding local legal person commercial banks to adhere to their development orientation. "After controlling cross-regional operations, local legal person commercial banks need to deepen their local economy, instead of unilaterally pursuing rapid growth in scale, they should be based on local ‘ Small and beautiful ’ Type development path. "
Chen Wen also said that the important motive for the approval of the establishment of regional small and medium-sized banks is to serve the regional market, but the loan through the Internet deviates from the original intention of serving the local market, and the risk is completely uncontrollable.
Ceng Gang mentioned that the national operation of small and medium-sized banks through internet loans in disguised form will lead to two problems: on the one hand, small and medium-sized banks can’t grasp the risks of foreign loans, and they can only rely entirely on joint lenders, which is out of their own control ability. On the other hand, the cross-regional operation of local legal entities may reduce the input of resources to the local economy, which may lead to insufficient support for the local economy and make small and medium-sized banks deviate from their original sources.
Dong Ximiao pointed out that this will have a greater impact on small and medium-sized banks that have already launched Internet loan business.
He also said, "How to define cross-regional operation, according to the user’s work place, household registration place or social security payment place or other standards, needs further exploration in practice."
Set the transition period: allow time for rectification and smooth transition.
The relevant person in charge of China Banking and Insurance Regulatory Commission said that regarding the quantitative standards of concentration risk management and quota management, the regulatory authorities will urge and guide all institutions to complete the rectification in an orderly manner before July 17, 2022 in accordance with the principle of "one line, one policy and smooth transition". For the standard of capital contribution ratio and cross-regional operation restrictions, the "new and old" will be implemented, and the new business will be required to implement the requirements of the Notice from January 1, 2022, allowing the stock business to be settled naturally.
"The transition period is set reasonably, presumably in order to adapt to the financial report, MPA assessment, etc., so that banks can arrange various tasks in an orderly manner." Su Xiaorui said.
Ceng Gang pointed out that this is a problem of stock adjustment. The scale of Internet loan business is not small, and there are many participating institutions. If it is promoted too quickly, it may have some short-term impacts. Therefore, given a certain period of time to adjust, it can basically ensure an orderly transition. The rest of the business will not be added after the natural expiration, "because these loans are usually not long", so it will not have much impact on the market.
Dong Ximiao also believes that a long transition period will allow sufficient rectification time for banks, which will help maintain a smooth transition of business and reduce the impact on customers.