(Economic Observation) Rejecting "savage growth" China's online microfinance business welcomes regulatory "tightening curse"

  China News Service, Beijing, November 3 (Reporter Wang Enbo) The China Banking and Insurance Regulatory Commission and the People's Bank of China announced on the evening of the 2nd the Interim Measures for the Administration of Online Small Loans (Draft for Solicitation of Comments) (referred to as the Draft for Solicitation of Comments).

The release of this document means that the Chinese people's familiar "Huabe" and other online small loan businesses will be put under a regulatory "tightening curse."

  In recent years, China's small loan companies have accelerated their online small loan business expansion.

Under "barbaric growth", some companies have extensive management, which not only infringes on the rights and interests of consumers, but also affects financial stability and lays down hidden risks.

  Guo Qiwei, chief analyst of the financial industry of Minsheng Securities, said that the draft is specifically aimed at the online lending business of small loan companies and fills the regulatory gap in this type of business in the past.

Overall, the regulatory standards of the new regulations have been significantly tightened, and the compliance threshold has increased.

The spirit of the document is in line with the previous guidance of the Financial Stability and Development Committee of the State Council on financial technology, that is, financial activities are fully incorporated into supervision in accordance with the law to effectively prevent risks.

  Looking through this document, we can find that a series of regulatory red lines have been drawn, and the threshold of online small loan business has been significantly raised.

For example, the draft clarifies the definition and regulatory system of online microfinance business, and clarifies that online microfinance business should be mainly carried out in the provincial administrative region of the registered place. Without the approval of the China Banking Regulatory Commission, the network should not be carried out across provincial administrative regions. Small loan business.

  Guo Qiwei pointed out that in the past, small loan companies were supervised by various localities, and the pattern of "multiple water governance" led to inconsistent supervision standards.

Once cross-regional business emerges, differences in regulatory standards will create room for institutional arbitrage.

This time, the power to supervise the inter-provincial online lending business has been received from the China Banking and Insurance Regulatory Commission, and supervision has been significantly upgraded.

  Another red line puts a "ceiling" on the balance of single-account online loans for natural persons and legal persons.

The draft requires that the balance of single-family online micro loans for natural persons shall not exceed RMB 300,000 in principle, and shall not exceed one third of their average annual income in the last three years, and the lower of the two amounts shall be loans Maximum amount; in principle, the balance of single-account online small loans to legal persons or other organizations and their related parties shall not exceed RMB 1 million.

  Guo Wuping, director of the Consumer Protection Bureau of the China Banking and Insurance Regulatory Commission, pointed out that, compared with licensed financial institutions, fintech companies lack an effective assessment of their repayment ability. They often form excessive credits, which together with scenario inducements stimulate advanced consumption, which makes some low-income people And young people are caught in a debt trap, which will eventually damage the rights of consumers and even bring harm to families and society.

  The above red line is just to "enclose" this phenomenon.

Xiao Feifei, chief analyst of CITIC Securities Banking, said that this move is aimed at constraining the debt leverage ratio of online small loan borrowers, avoiding excessive consumption and debt, and reducing the systemic risk exposure of online consumer credit.

It is expected that in the future, small online loan companies will increase personal income level assessment in the loan review process.

  In addition, the solicitation of opinions also sets requirements for the proportion of joint loans: In a single joint loan, the proportion of capital contribution of small loan companies operating online small loan business shall not be less than 30%.

  Insiders said that, in fact, the sources of funds behind Internet financial credit products such as "Huabe", "Borbe" and "Bai Tiao" include banks, consumer finance companies, small loan companies, trusts and other types of institutions.

Guo Wuping bluntly said that most of the funds in the cooperation between financial institutions and technology companies come from financial institutions.

"In the joint loans to individuals and small and micro enterprises, more than 90% of the funds come from the banking industry, and some are as high as 98% or more."

  Xiao Feifei believes that the implementation of the above-mentioned regulatory measures means that the demand for on-balance-sheet lending by small loan companies will increase, especially for companies with small initial capital contributions.

Combined with the requirements of this document that non-standard financing leverage should not exceed 1 time and standardized financing leverage should not exceed 4 times, small loan companies will face the need to increase capital, reduce financing scale, and restructure their licenses.

  As the red line of supervision is drawn, what will happen to the online micro-credit industry wearing a "tightening curse"?

  "Upgraded supervision and early prevention and control of systemic risks can benefit the stable development of the small loan industry in the long run." In Guo Qiwei's view, the small loan company industry will gradually form a capital regulatory system to complement the regulatory shortcomings formed by the past "multiple governance" .

At the same time, the supervisory authorities are blocking the side door and opening the front door to support banks and consumer finance companies in the traditional financial sector to continuously innovate and develop financial products that meet the consumer sector, so as to meet the inherent needs of consumption upgrading and economic transformation.