China’s Banking Regulator Targets Disorder on Credit Card Market

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The China Banking and Insurance Regulatory Commission (CBIRC) has issued new regulations that seek to address problems in the Chinese credit card market.

On 16 December the China Banking and Insurance Regulatory Commission (CBIRC) issued the draft version of the “Notice on Further Expediting the Standardised and Healthy Development of Credit Card Operations” (关于进一步促进信用卡业务规范健康发展的通知(征求意见稿)) for the solicitation of opinions from the public.

According to CBIRC the Notice contains a total of 37 administrative requirements that seek to “strike heavily against and rectify credit card market problems,” covering areas including fee collection, excess credit provision, “sleeping cards” and joint-name cards.

CBIRC said that some banks in China had “employed unscientific business concepts and blindly pursued scale effects and market share, with the negligent issuance of cards and re-issuance being particularly pronounced.

“[This] has led to the problems of disorderly competition and waste of resources.”

“For some time now banks have vigorously developed credit card operations and made card issuance volume a major assessment indicator,” said Zeng Gang (曾刚), deputy-chair of the National Institution for Finance & Development, to state-owned media.

“This has led to several outcomes – the first is that it has led to a large volume of cards being in effective, which is a waste of resources. The second is that there could be potential risk, and risk to banks or customers if there is exploitation by unlawful elements.

“Finally, the issuance of a large volume of cards leads to a decline in the standards for customers, and the extension of credit to people for whom credit should not be extended, or excess credit extensions. All of this expands the credit risk for banks.’

As of the end of the third quarter of 2021 China had seen the issuance of approximately 798 million credit cards and combination debit cards, for an increase compared of 0.97% to the previous quarter, according to data from the Chinese central bank.

The total amount of credit card debt in arrears for more than six months was 86.926 billion yuan, for an increase of 6.26% compared to the previous quarter, accounting for 1.04% of outstanding credit card debt.