China issues more rules for online lending to control risk

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

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

For example, lenders are required to intensify their credit and risk assessment process, take additional initiatives to monitor the use of funds to prevent misappropriation and ensure that loan agreements are properly drafted so that all parties are clear about their rights and responsibilities, according to the BCRC.

The background: The latest measures follow a set of earlier rules published by the CBIRC in February strengthen the supervision of online financing carried out both by traditional commercial banks and by fintech giants such as Ant Group Co. Ltd.

Some players in the banking industry have previously told Caixin they fear the new rules will make it harder for many regional banks to do business.

The February rules include an overall limit on online loans issued by banks in cooperation with third parties as a percentage of their total credit, as well as a mandate that in any joint loan, the other institution must provide at least 30% capital.

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

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

Contact Reporter Kelsey Cheng ([email protected])

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