China’s’ banking regulator has called for the country’s four managers of distressed bank assets to help bail out the non-performing loans (NPL) of beleaguered peer-to-peer (P2P) lending platforms.
At a meeting held on Wednesday in Beijing the China Banking and Insurance Regulatory Commission called for asset management corporations (AMCs) Cinda, Great Wall, Huarong and Orient to expand their mandate to include P2P NPL’s, according to sources speaking to Reuters.
CBIRC also mooted the possibility that the AMC directly take over P2P platforms that have come under pressure but still possess sound underlying assets according to sources.
The move arrives in the wake of a wave of P2P platform closures around China, which has led to efforts by burnt investors to stage protests at CBIRC’s headquarters in Beijing, as well as an official ban on the launch of new platforms.
Data from Wangdai Zhijia (网贷之家) indicates that as of the end of June China had seen the establishment of 6183 P2P lending platforms, of which 4347 have either suspended operation or succumbed to problems, leaving only 1836 in regular operation.
Compared to November 2015, the peak period for P2P lending in China when the number of active platforms reached 3476, the number of platforms in regular operation has fallen by almost a half.
China’s AMC’s were first established in 1999 as part of efforts to deal with the NPL’s of the big four state-owned banks in the wake of the Asian Financial Crisis.
While the AMC’s are still struggling with the mountain of distressed assets that they’ve accumulated over the past nearly two decades, some analysts say that the companies are best positioned to help bail out tottering P2P lending platforms.
“The state AMC’s are the only ones that can help with this difficult situation, which is driving government officials around the clock,” said Professor Sun Wujun from the Nanjing University Business School according to a report from the South China Morning Post.
“Economic growth is still under pressure. It is not the best time to absorb distressed assets…it is out of political and social responsibility, not economic sense, that the AMC’s are stepping in.”