China-Singapore Jingwei Client, September 4th, August 20th, the Supreme People’s Court officially issued the newly revised "Regulations of the Supreme People’s Court on Several Issues Concerning the Application of Law in the Trial of Private Lending Cases" (hereinafter referred to as the "Regulations"), which defines private lending The upper limit of judicial protection of interest rates is 4 times the one-year loan market rate (LPR).

　　One stone stirred up a thousand waves.

As one of the main players in the consumer finance market, licensed consumer finance companies have also been severely impacted.

According to the Sino-Singapore Jingwei client, some consumer finance companies believe that if the new upper limit of judicial protection for private lending rates is applied to financial institutions, then for most consumer finance companies, it is not necessary to mention whether they can make a profit or even survive. Going down has become a problem.

Pricing cannot cover costs

　　After the Higher People's Court issued the new regulations, all consumer finance companies held urgent internal seminars.

"As to whether interest rate pricing and future strategies should be adjusted, frankly speaking, internal discussions have not ended yet." A consumer finance company practitioner told the Zhongxin Jingwei client.

　　Taking the calculation of four times the one-year LPR interest rate of 3.85% released on August 20, 2020 as an example, the upper limit of judicial protection for private lending interest rates is 15.4%, which is a larger margin compared to the previous 24% and 36%. decline.

　　With the upper limit of 15.4%, can the 27 licensed consumer finance companies still make a profit?

The answer given by the practitioner is no.

The above-mentioned practitioners told reporters: The cost of consumer finance companies mainly includes four parts: capital, operation, risk, and customer acquisition, of which the most important is the capital cost.

　　Since the opening of the first four pilot consumer finance companies in 2010, financing has always been a major problem for licensed consumer finance companies.

　　"China Consumer Finance Corporation Development Report (2020)" (hereinafter referred to as the report) pointed out that the increase in the scale of consumer finance companies depends on the support of their financing capabilities. Their current financing methods mainly rely on shareholder capital increase, borrowing from financial institutions, and through interbank Inter-bank lending, asset securitization, issuance of financial bonds, etc.

　　The practitioner told the Sino-Singapore Jingwei Client that if it is a licensed consumer gold company, financing should first consider the public issuance of ABS and financial bonds because the cost is relatively low; the average cost of interbank lending is higher than that of ABS and financial bonds.

If financing from a trust company, the cost is even higher.

　　“The comprehensive industry costs of licensed consumer finance companies are basically above 20%, which is much higher than the 15.4% interest rate ceiling. The relevant person in charge of another consumer finance company said frankly, “If the 15.4% ceiling applies to licensed consumer finance companies, It is the rhythm of putting a fortune into a loss.

Do you think the company can continue to operate?

I think the entire industry has to withdraw from the market.

"

Financing is difficult and expensive

　　Among the four major costs mentioned above, the cost of capital is the most concerned issue of consumer companies.

It is understood that inter-bank lending is one of the main financing channels for consumer finance companies.

　　In terms of interest rates, the China Merchants Union Consumer Finance Annual Report shows that as of the end of 2019, except for two interbank loans with a maturity of more than one year, the interest rates are 5.2% and 4% respectively, and the remaining interbank loans have a maturity between 1 month and 1 year. , The interest rate is between 3.11% and 4.45%, while in 2018 it was between 4.20% and 6.39%.

　　"Interbank lending rates for consumer finance companies in banks will be lower, and other consumer finance companies may be relatively higher." The source revealed.

　　The above-mentioned report pointed out that in terms of access to inter-bank lending, consumer finance companies need to make profits for two consecutive years. Currently, there are only 13 consumer finance companies that qualify.

In addition, the amount of financing is restricted by the "Administrative Measures on Consumer Finance Pilot Program" that the proportion of inter-bank borrowing funds is not higher than 100% of the total capital.

　　In recent years, consumer finance companies are also expanding diversified financing channels, and issuing ABS has become the first choice for some licensed consumer finance companies.

　　Since last year, Immediately Consumer, Industrial Consumer, and Home Credit have successively issued ABS products.

In terms of interest rates, among the first phase ABS products of Anyihua 2020, which will be sold immediately, the coupon rates of priority A and priority B are 3.50% and 3.98% respectively; Gitzo will start the second phase of ABS 2020 by Gitzo. For products, the coupon rates of Priority A and Priority B are 3.95% and 4.87%, respectively; the second phase of Xingqing’s 2019 ABS Priority A and Priority B coupon interest rates, which were launched by Xingye, are 3.40% and 3.75%, respectively.

　　However, not all consumer finance companies are eligible to issue ABS.

Due to the regulatory requirements of the China Banking and Insurance Regulatory Commission, a licensed consumer finance company must be at least three years old to obtain the ABS qualification for wholesale consumer finance.

　　As of press time, only 10 companies including Bank of China Consumer Finance, Home Credit Consumer Finance, Merchants Consumer Finance, Industrial Consumer Finance, Immediate Consumer Finance, Suning Consumer Finance, Haier Consumer Finance, Jincheng Consumer Finance, Hubei Consumer Finance and Jinshang Consumer Finance hold Brand consumer finance company obtained the qualification to issue consumer finance ABS.

　　In addition, although the interest rate of financial bond financing is low, it has higher requirements for the issuer. Currently, there are only 5 consumer finance companies that have obtained wholesale financial bonds, namely, Bank of China Consumer Finance, Home Credit Consumer Finance, Industrial Consumer Finance, China Merchants Union Consumer Finance.

　　"The inter-bank market and the issuance of ABS, financial bonds and other financing methods have requirements for the establishment period. For newly established consumer finance companies, the paid-in registered capital and shareholder loans are the main sources of funds. In addition, some consumer finance companies also use joint lending, etc. Way to expand business." Wang Shiqiang, a senior researcher at the Sack Research Institute, introduced.

　　Chen Wen, director of the Digital Economy Research Center of the School of Finance, Southwestern University of Finance and Economics, told the Sino-Singapore Jingwei Client that at the beginning of last year, banks had begun to provide credit to small and micro enterprises, which actually squeezed funds for consumer finance.

Under the guidance of policies, the interest rate of small and micro enterprise loans is in a downward channel. Considering the capital competition between consumer finance and small and micro enterprise loans, it may pose upward pressure on the capital cost of consumer finance.

　　In addition, Chen Wen believes that from the institutional level, the cost of capital mainly depends on the asset quality of the specific institution, the institution's risk control ability, and the endorsement of shareholders.

　　“At present, the 27 licensed consumer finance companies have mixed capital acquisition capabilities. For companies with central enterprises or state-owned banks, and national joint-stock commercial banks shareholders, the cost of inter-bank lending or financial debt is relatively controllable. However, some local financial institutions initiated or even Consumer-funded companies initiated by private capital may have an upward trend in costs.” Chen Wen said.

　　He further judged that the polarization of future financing of consumer finance companies will become increasingly serious. The consumer finance industry itself is already a red sea. It is not ruled out that shareholders of some consumer finance companies have some resources or high-quality scenarios for in-depth binding and financing costs. It may go down.

However, for some small consumer finance companies, especially those serving high-risk customers, their own risk control is relatively loose, and even some projects are released through lending institutions transformed by private lending institutions. The risk control is also at the side of external cooperative institutions. The degree of financing difficulties will further increase.

The finale of the long tail customer

　　After the "red line" of private lending interest rates was lowered, many consumer finance companies told the Sino-Singapore Jingwei client that the company would have to give up more customers in consideration of the possible operating risks.

　　"Consumer finance companies are all based on risk pricing, that is, they have different pricing strategies for different customer groups. For example, the interest rate for high-risk customer groups will be relatively higher." A staff member of a consumer finance company introduced.

　　Before the introduction of the new judicial interpretation, the Sino-Singapore Jingwei client learned from a consumer finance company that the company implements floating interest rates. According to the results of risk control, the interest rate for high-quality borrowers is around 18%.

The bad debt rate of the sub-optimal group is higher, and the interest rate is generally around 27%.

　　After the release of the new regulations, the company’s strategy has also changed. “We also mentioned that the customer base will move up before, hoping to serve higher quality customers at low interest rates. In the future, this strategy will be more focused to cover the cost of bad debts." The above staff said.

　　The relevant business person in charge of another consumer finance company also admitted that if financing costs cannot be reduced, the company can only give up more customers.

As a result, the borrowing needs of these customers cannot be met, and they may go underground.

　　In addition, consumer finance companies have to face the inevitable fact that they cannot compete head-on with banks for high-quality customers.

　　"Maybe many consumer finance companies will consider strengthening risk control and lending to high-quality customers. But this will face an embarrassment, that is, banks are also doing personal consumption loan business." Chen Wen, director of the Digital Economy Research Center, Southwestern University of Finance and Economics, analyzed .

　　The above-mentioned person in charge believes that for consumer finance companies, the upward shift in customer base is just abandoning the higher-risk part of their customers. Based on the positioning of consumer finance companies in the financial system, it is difficult to compete with banks for low-risk customers.

　　"According to the positioning of consumer finance companies in the financial system, consumer finance companies cannot absorb deposits, and the financing costs are naturally higher than commercial banks. If the customer base is moved to the customer base served by commercial banks, then consumer finance companies are likely to lose The meaning and ability of existence.” The person in charge said frankly.

　　In the view of Bi Yanguang, a senior researcher at Qicai Think Tank, although the upper limit of private lending interest rates has been lowered, a certain "backlash" may occur.

From the perspective of lending, it is not that the lower the interest rate, the easier it is for companies and individuals to borrow money.

Especially in the "low interest rate era", if you want to chase cheap goods, you may have to pay a higher "price."

　　"The problem is that the overall credit rating has not yet been improved on a large scale, and the credit information base needs to be improved. Whether the borrower can repay at maturity still follows the two major factors of repayment willingness and repayment ability. Therefore, the level of interest rates does not It is not a decisive factor. If the interest rate is lowered and the borrower's willingness to repay is weak, he will not repay even if he has money. What should we do?" Bi Yanguang said bluntly.

　　Dong Ximiao, chief researcher of the Zhongguancun Internet Finance Research Institute, said that if the legal rights of financial institutions and private lending institutions are not effectively protected, the credit resources of financial institutions may refocus on high-credit customers, and the supply of credit to long-tail customers may be reduced. ; And some lending institutions take the initiative to withdraw due to legal risks, intensifying the "bad money driving out good money", and the lending market may become more irregular.

(Zhongxin Jingwei APP)

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