CBRC Tightens the Screws on Internet Lending by Private Banks


China’s banking regulator plans to step up regulatory requirements for the online lending activities of the country’s private banks.

CBRC issued the draft version of its “Private Bank Online Lending Provisional Administrative Measures” towards the end of June, with the goal of standardising online lending activities by non-government banks.

The Measures specifically target borrowers who use online channels to apply for consumer or liquid capital loans, and private banks who in turn use online, telecommunications or big data technology to assess borrowers and provide them funds via procedures that are conducted entirely via the Internet.

The Measures propose that private banks submit applications to regulators in order to obtain approval for online lending activities, and the submission of separate applications for personal loans and liquid capital loans.

According to Caixin as of July 2017 a total of 17 private banks have obtained approval to conduct online lending operations.

Market observers note that the new provisions could stymie online lending activity by preventing unapproved private banks from participating in syndicated loans via the Internet.

Because private banks have limited registered capital and do not draw a large volume of deposits, when they engage in online lending activities they often cooperate with traditional banks via the use of syndicated loans.

This enables banks to split credit risk and share data, with some syndicated loan products involving cooperation between as many as 25 different financial institutions.

According to the current CBRC draft, however, only financial institutions that are licensed by the regulator itself will be able to participate in online syndicated lending, which likely excludes those lenders that have obtained local licenses for online micro-loans.

Much uncertainty surrounds the impact of the draft on the participation in syndicated online loans by e-commerce companies or fintech platforms such as JD Finance and Vipshop,

One industry observer said to Caixin that while P2P Internet platforms are not qualified to provide loans within China, they can participate in syndicated loans as cooperating parties.

A CBRC source  begs to differ, however, stating this view is contrary to the spirit of the law, and that “all finance is subject to regulation.”