The China Banking Regulatory Commission has ratcheted up its rules governing consumer finance firms that make modest loans to smaller retail or business borrowers.
A circular dispatched to regional bank branches by CBRC mandates a ban on consumer financing firms providing loans to unapproved borrowers via peer-to-peer platforms, or the provision of funds for cash loans, campus loans, or downpayment loans for property.
Authorities have expressed concern about the lack of risk controls and adequate risk assessments of borrowers in the sector, as well as the levying of sky-high interest rates.
The move comes amidst Beijing’s ongoing campaign to contain risk in China’s financial sector and deleverage the economy, following years of break-neck credit expansion in the wake of the Great Financial Growth.
China’s consumer finance sector has seen surging growth in growth in recent years, finding ample opportunity in the current inability of established banks to provide financing to smaller borrowers.