China’s Banking Regulator Hopes to Step up Lending Efficiency via Financial Guarantee Agencies

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China’s banking and insurance regulator hopes to bring greater transparency to the financial guarantee sector by mandating the compilation of approved agencies by province-level authorities.

On 11 August the China Banking and Insurance Regulatory Commission (CBIRC) announced the release of the “Notice Concerning Properly Performing Regulatory Work for Governmental Financial Guarantee Agencies” (关于做好政府性融资担保机构监管工作的通知), for the purpose of “driving governmental financial guarantee agencies to fulfil their role.”

The Notice mandates that province-level financial authorities compile preliminary lists of governmental financial guarantee agencies before the end of September that will subsequently be released via their official websites for the convenience of public inspection.

“The regulatory authorities for financial guarantee companies should confirm that agencies on the list have stable operations, controllable risk, and adequate repayment capability,” said a CBIRC official.

“Those agencies with weak capital standing and irregular operations can only be included on the list following upgrade of their institutional capability via methods such as restructuring.

“Governmental financial guarantee agencies should make loan guarantee operations their priority, and focus on support of small business and agriculture, pragmatically reduce guarantee fees, expand guarantee scopes, and operate so as to maintain principal with modest profits.

“With regard to those with large outstanding operations that have not prioritised small business and agricultural, overall consideration should be given to inclusion on name lists based on their functional positioning and development intention.

With regard to methods for improving cooperation between banks and financial guarantee agencies, the CBIRC official called for “exploring the undertaking of parallel inspections and approvals with governmental financial guarantee agencies, establishing full-procedure time restriction systems, and raising loan issuance efficiency.”

The Notice also calls for regulatory authorities to make use integrated use of on-site and off-site inspections to strengthen monitoring and analysis of the scope of small business and agricultural support of agencies and their overall guarantee rates.

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