China publishes new online lending rules to reduce financial risk

The China Banking and Insurance Regulatory Commission (CBIRC) has set new quantitative requirements for commercial banks that provide loans online with the aim of boosting the healthy development of the industry.

“When a commercial bank and a partner co-lend loans online, the capital contributed by the bank’s partner to a single loan should not represent less than 30% of the total principal of the loan,” the bank said. regulator in a notice to all banks on Friday. The rule goes into effect on January 1 of next year and does not affect outstanding loans.

For a bank and its subsidiaries, the balance of joint loans must not exceed 25% of the Tier 1 capital of the lender, according to the regulator. The requirement aims to end the practice of institutions relying on a single online platform for their fintech business. In total, online loans are not expected to exceed 50% of all outstanding loans, the CBIRC added.

For both requirements, the regulator will propose specific guidelines so that banks can restructure their activities before July 17, 2022.

The new standard also complies with a draft microcredit rule to avoid regulatory arbitrage. The CBIRC and the People’s Bank of China jointly released the draft, for which they still seek public comment, in November, days before the IPO of the blockbuster Ant Group, which ultimately led to its suspension.

Ant Group declined to comment when contacted by KrASIA. JD Digits, the fintech unit of e-commerce giant JD.com, did not immediately respond to KrASIAasks for comment on how the new rule will affect its business.