The Chinese government has unveiled a raft of measures to deal with the country’s trouble-plagued peer-to-peer (P2P) lending sector, in the wake of a slew of platform closures and efforts by investors to stage protests in front of the national banking regulator.
China’s P2P sector has seen an accelerating number of closures since the start of the second half of 2018, amidst heightened scrutiny by financial regulators.
The severity of the problem has led to efforts by burnt retail investors to stage public protests in front of the head office of the China Banking and Insurance Regulatory Commission.
In response to mounting problems in China’s P2P sector, the office of the Online Financial Risk Specialist Rectification Work Leadership Team (互联网金融风险专项整治工作领导小组办公室) recently convened a meeting on handling risk in relation to online lending with the participation of officials from relevant provinces, municipalities and departments.
The meeting outlined a total of ten key measures for the further handling of risk in China’s P2P lending sector.
i) Clear out channels for complaints and rights protection of lenders.
Online lending organisations should establish communication mechanisms and raise the transparency of operations. Local governments should establish communication windows, interpret policies, and respond to complaints.
ii) Undertake compliance checks of online lending organisations, guide the healthy development of compliant operations.
iii) The simultaneous implementation of multiple measures to dispose of risk.
Regulators will guide online lending entities in combating liquidity risk by means of multiple market-based methods, including mergers and structuring, asset realisation and co-operation with other financial institutions.
iv) Ensuring that online lending organisations and shareholders fulfil their legal obligations.
Organisations that have already withdrawn from the market must formulate liquidity and reimbursement plans in accordance with the bankruptcy law, corporate law and other regulatory requirements, and shareholders shall lawfully bear joint liability.
v) Standardise the withdrawal of online lending organisations.
The Leadership Team calls for the establishment of a filing system, the clarification of withdrawal procedures and the standardisation of asset disposal and debt repayment procedures to protect the lawful rights and interests of lenders.
vi) Strike against online lending platforms that engage in “malignant withdrawal.”
The Leadership Team said that it would arrest absconding personnel, expand the vigour of legal penalties and achieve “effective shock.”
vii) Intensify the crackdown on malicious absconders from debt.
Information on enterprises or individuals who maliciously abscond from debt will be entered into China’s credit system and the “Credit China” (信用中国) database.
viii) Strengthen efforts to propagate basic financial knowledge.
Help the public to accurately identify illegal fund-raising and fraudulent fund-raising, strengthen their ability to identify investment risk and their prudential awareness.
ix) Guide lenders in the lawful and rational protection of their rights, and lawfully striking against rumours and rumour-mongering,
x) Strict ban on the establishment of new online lending organisations.
All regional authorities must ban the registration of new online finance platforms or lending organisations, and strengthen registration and administration of enterprise names.