CBIRC Caps Leverage Multiple for Factoring Companies at Ten


China’s banking regulator has issued a new directive putting a limit on the leverage multiple for factoring companies.

The China Banking and Insurance Regulatory Commission (CBIRC) recently issued the “Notice Concerning Strengthening Regulation and Administration of Commercial Factoring Enterprises” (关于加强商业保理企业监督管理的通知), with a view to better standardising and regulating Chinese factoring companies.

Key requirements of the Notice include:

  • The accounts receivable of a single debtor cannot exceed 50% of total risk assets;
  • The accounts receivable of debtors who are affiliates cannot exceed 40% of total risk assets;
  • Risk assets cannot be more than 10-fold greater than net assets.