Beijing Bans Lending of Operating Licenses by Local Financial Institutions

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Beijing’s municipal financial regulator has just issued the “Beijing Municipal Local Financial Supervisory and Administrative Regulations (Draft Version for Solicitation of Opinions)” (北京市地方金融监督管理条例(征求意见稿)).

The Regulations will be applicable to micro-loan companies, financial guarantee companies, financial leasing companies, commercial factoring companies, pawnbrokers, local asset management companies, regional investment companies, and rural cooperative societies that engage in mutual credit arrangements.

According to authorities the new Regulations seek to remedy gaps in local financial regulatory regimes when it comes to rules and standardised documents, while also making stricter requirements with regard to the online and large-scale operations of local financial institutions.

The Regulations indicate that Beijing will “encourage standardised financial innovation, drive fintech innovation and coordinate with central government financial agencies in the undertaking of fintech innovation regulatory sandbox trials.”

The Regulations also set out four “red lines” of prohibited operation, which include:

  1. Prohibition on accepting or covertly accepting deposits;
  2. Prohibition on lending or leasing or covertly lending or leasing operating licenses;
  3. Prohibition on entrusted investment, independent operation or entrusted issuance of loans without obtaining operating licenses,
  4. Engaging in other activities that are prohibited by laws and regulations.

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