CBIRC Steps up Scrutiny of Supply Chain Financing

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China’s banking regulator has issued new requirements for supply chain financing following concerns that members of the wealth management sector are engaging in fraudulent transactions.

The China Banking and Insurance Regulatory Commission (CBIRC) recently issued the “CBIRC Office Guidance Opinions Concerning Driving Supply Chain Financing to Service the Real Economy” (中国银保监会办公厅关于推动供应链金融服务实体经济的指导意见) to the country’s policy banks, large-scale banks, joint-stock banks and foreign-invested banks, according to a report from Diyi Caijing.

CBIRC also reportedly sent the regulatory document to members of China’s insurance sector, as well as the peak bodies for the country’s banking and insurance sectors.

The Guidance Opinions called for “upholding the veracity of transaction conditions and strengthening regulation of supply chain finance.”

CBIRC specifically requires that banks and insurers “rely upon core supply chain finance enterprises to provide a raft of comprehensive financial services including finance, settlement and cash management to upstream and downstream supply chain enterprises, based upon the real transactions between core enterprises and upstream and downstream supply chain enterprises, and various forms of information including overall logistics information, information flows and fund flows.”

The Guidance Opinions also “encourage banking and insurance entities to establish supply chain finance operation management departments (centres); strengthen centralised, unified management of supply chain finance operations, drive the innovative growth of supply chain finance operations, and accelerate the training of specialist teams.”

The move from CBIRC arrives following reports that members of China’s wealth management sector are using fraudulent forms of supply chain financing to tap funds, leading to a recent major scandal involving Camsing Global (承兴国际) and Nuoya Fortune (诺亚财富).

“These types of operations are an ‘open secret’ in the industry,” said one veteran risk controller to 21st Century Business Herald.

“Some third-party wealth management companies and privately offered funds are engaging in [other] financing in the name of supply chain financing – cases of fraudulence are more severe than imagined by the market.”

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