China enacts more rules for online lending to control risk

What’s new: China’s top banking regulator has enacted further rules for online lending by commercial banks and internet platforms as authorities step up efforts to control financial risks in the sector.

The additional rules clarify the credit management and independent risk control requirements expected of lenders, according to a Q&A released by the China Banking and Insurance Regulatory Commission (CBIRC) on Friday.

For example, lenders are expected to strengthen their credit and risk assessment processes, take additional initiatives to monitor the use of funds to avoid embezzlement, and ensure loan agreements are properly drafted so that all parties know their rights and obligations accurately know the CBIRC.

The background: The latest measures follow an earlier set of rules published by the CBIRC in February to strengthen oversight of online funding conducted by both traditional commercial banks and fintech giants such as Ant Group Co.Ltd.

Some banking industry participants previously told Caixin they were concerned the new rules could make it harder for many regional banks to do business.

The February rules include an overall limit on online loans made by banks in collaboration with third parties as a percentage of their total loan, and a requirement that any joint loan requires the other institution to provide at least 30% of the capital.

Related: More bad news for banks as regulators limit online lending

Quick Takes are condensed versions of China-related quick news stories for you to use.

Contact reporter Kelsey Cheng ([email protected])

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