Out-Law News | 24 Feb 2021 | 1:50 am | 1 min. read
China has tightened rules for commercial banks’ online lending business.
Online lending platforms are required to contribute at least 30% of the funding for loans they offer in their partnership with commercial banks effective from 1 January 2022, according to a statement of the China Banking and Insurance Regulatory Commission (CBIRC).
The balance of internet loans issued by a commercial bank and a single partnered online institution including related parties, should be no more than 25% of the bank’s net tier one capital, it said.
The balance of internet loans issued by a commercial bank and its cooperative institutions may not exceed 50% of the total loan balance.
Local banks are not allowed to conduct internet lending business across their registered district, except those whose activities are online and which meet other criteria that set by CBIRC.
Commercial banks are required to carry out risk management on internet loans independently and are not allowed to outsourcing risk control links.
E-commerce expert Leo Xin at Pinsent Masons, the law firm behind Out-Law, said: “The new rules will push either the 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 have to input more funding than before and share the risks with the banks. Platforms who are short of funding might be wiped out of the market. On the other hand, local banks are required to focus on local lending scenario, such as supporting local customer’s increased financing needs.”