China toughens online lending rules

Online lending platforms are required to contribute at least 30% of the financing of the loans they offer as part of their partnership with commercial banks from January 1, 2022, according to a statement from the China Financial Regulatory Commission. banks and insurance companies (CBIRC).

The balance of internet loans issued by a commercial bank and a single partner online institution, including related parties, should not exceed 25% of the bank’s Tier 1 net equity, he said.

The balance of Internet loans issued by a commercial bank and its cooperative institutions cannot exceed 50% of the total loan balance.

Local banks are not permitted to carry out Internet lending transactions in their registered constituency, except for those whose activities are online and which meet other criteria defined by the CBIRC.

Commercial banks are required to perform risk management on Internet lending independently and are not allowed to outsource risk control links.

Ecommerce expert Leo Xin at Pinsent Masons, the law firm behind Out-Law, said, “The new rules will push banks and their business partners such as internet platforms to restructure their current business models. In order to continue the internet lending business, the platform may need to provide more funding than before and share the risk with the banks. Platforms that lack funding could be eliminated from the market. On the other hand, local banks are required to focus on a local lending scenario, such as supporting the increased financing needs of local customers.


Source link

David A. Albanese

Leave a Reply

Your email address will not be published. Required fields are marked *