CBIRC’s New Online Lending Rules Ban Speculation on Property and Stocks, Limit Consumer Loans

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China’s banking regulator has issued the draft version of new online lending rules that seek to contain risk across a broad range of fronts.

On 9 May the China Banking and Insurance Regulatory Commission (CBIRC) issued the draft version of the “Commercial Bank Online Loan Provisional Administrative Measures” (商业银行互联网贷款管理暂行办法) for the solicitation of opinions from the public.

The Measures stipulate that online loan funds cannot be used for investment in property, stocks, bonds, futures, financial derivatives, asset management products or immoveable assets.

The Measures also place a strict ban on commercial banks working with third party organisations that have a record of gathering or using personal information in breach of regulations, or use violent methods to expedite the repayment of loans.

A CBIRC offical said that the new Measures will define online lending as “commercial banks using communications technology such as the internet and mobile communications to conduct cross verification and risk management based on risk data and risk models; online automated processing of loan applications and undertaking of risk assessment, as well as the completion of credit approvals, contract execution, loan payment, post-loan management and other key operation segments, in order to provide personal loans and working capital loans to qualified borrowers for consumption or daily operating turnover.

The Measures also stipulate that online loans should in principle be small-sum and short-term, as well as characterised by controllable risk.

The quota for personal consumer loans cannot exceed 200,000 yuan, while their maturities cannot exceed one year and they must be paid at once upon maturing.

With regard to risk management, the Measures mandate that commercial banks should establish comprehensive risk management systems for online loan operations and strengthen risk data and risk modelling.

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