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Commercial banks have been prohibited from outsourcing basic risk control links for their online lending business, under new regulation.
Meanwhile, the balance of Internet loans jointly financed by a bank and all its cooperative platforms will not exceed 50 percent of the bank’s total loan balance.
When the Internet loan business involves any cooperator, the central links of risk management, such as credit evaluation and approval, will be carried out by the commercial bank itself independently and efficiently and the outsourcing of said business is strictly prohibited, according to a notice from the China Banking and Insurance Regulatory Commission.
To help banks operate their online lending business prudently and diversify their operational risks, the balance of loans issued by commercial banks and a single partner will not exceed 25 percent of Tier 1 net capital, and the balance of Internet loans jointly financed by a bank and all its cooperative platforms will not exceed half of the bank’s outstanding loans.
Tier 1 (basic) capital consists largely of shareholders’ capital and is a measure of the financial condition of a bank.
Additionally, local corporate banks cannot conduct Internet lending business beyond their place of registration, the notice adds.
Interim measures for commercial bank internet loan management announced in July 2020 have helped build a basic framework for relevant businesses, the China Banking and Insurance Regulatory Commission said.
The tighter scrutiny came when the industry’s top regulator found that a gap remained between the banks’ practical business and relevant regulatory requirements.
This new policy will lead to long-term development of banks and improve their support for the real economy and improved consumption, CBIRC said.
