Interface News Reporter | Zeng Yanglin
Interface News Editor |
After soliciting opinions from the industry, the Administrative Measures for Consumer Financial Companies (Consultation Draft) was officially released.
On December 18, the State Administration of Financial Supervision ("CFS") issued a public consultation on the Measures for the Administration of Consumer Financial Companies (Consultation Paper) (the "Consultation Paper"), and the deadline for feedback is January 19, 2024.
The person in charge of the relevant department of the State Administration of Financial Supervision said that since the revision and promulgation of the "Measures for the Administration of Pilot Projects of Consumer Financial Companies" (Order No. 2 of 2013 of the China Banking Regulatory Commission), it has played an important role in leading consumer financial companies to adhere to the functional positioning of professional consumer credit and promoting the fundamental role of consumption in the economy.
The current Measures for the Administration of the Pilot Program of Consumer Financial Companies can be traced back to 2009, when the former China Banking Regulatory Commission (CBRC) promulgated the Measures for the Administration of the Pilot Program of Consumer Financial Companies, which provides important legal guarantees for the access, supervision and regulation of the pilot consumer financial companies. In 2013, the Measures for the Administration of Pilot Projects for Consumer Finance Companies were revised for the first time, focusing on the revision and adjustment of the conditions of major investors, business scope and business rules, so as to reflect and implement the relevant requirements for the expansion of the pilot program.
"After years of development, the business model and risk characteristics of the consumer finance company industry have undergone significant changes, and the current measures can no longer meet the high-quality development and regulatory needs of consumer finance companies. At the same time, in recent years, the State Administration of Financial Supervision has issued a series of regulatory systems and regulations in terms of corporate governance, equity management, and consumer rights protection. The person in charge said.
It is understood that the "Draft for Comments" has a total of 10 chapters and 79 articles, and the revisions mainly involve optimizing access policies, highlighting business hierarchical supervision, strengthening corporate governance, strengthening risk management, focusing on the protection of consumer rights and interests, standardizing the management of cooperative institutions, and improving the market exit mechanism.
The shareholding ratio of the investor of the consumer finance company shall not be less than 50%
In terms of raising the entry criteria, the Consultation Paper raises the standards for the assets, operating income and other indicators of major investors, as well as the minimum shareholding ratio requirements, including:
As the main investor of the consumer finance company, the total assets of the financial institution shall not be less than RMB 500 billion or its equivalent in freely convertible currency at the end of the most recent fiscal year;
As the main investor of a consumer finance company, a non-financial enterprise shall have an operating income of not less than RMB 60 billion or its equivalent in freely convertible currency in the most recent fiscal year;
The shareholding requirement for major investors of consumer finance companies has been increased from no less than 30% to no less than 50%.
The person in charge of the relevant department of the State Administration of Financial Supervision said that there are two main reasons for consideration: First, from the perspective of regulatory practice in recent years, increasing the shareholding ratio of major investors is conducive to consolidating shareholder responsibilities, enhancing shareholders' willingness to participate in the company's operation, giving better play to the advantages of shareholder resources, and promoting shareholders to actively play a supporting role. Second, it is conducive to improving the efficiency of decision-making and avoiding the problem of corporate governance failure and imbalance due to the relative dispersion of equity.
It is worth noting that, in terms of access criteria, the Consultation Paper also stipulates that the registered capital of a new consumer finance company shall not be less than RMB 1 billion or its equivalent in a freely convertible currency.
Cancellation of the business of "agency sales of insurance products related to consumer loans".
In terms of strengthening the supervision of business classification, the Consultation Paper optimizes and adjusts the business scope of consumer finance companies, and focuses more on their main responsibilities and main businesses. There are two main aspects:
On the one hand, it distinguishes between basic business and special business. Seven businesses, including "issuance of personal consumption loans" and "issuance of non-capital bonds", will be included in the basic business, and four businesses, including "asset securitization business", "fixed-income securities investment business" and "consumer finance-related consulting services", will be included in the special business.
On the other hand, non-main and non-essential businesses will be abolished. In view of the high degree of professionalism in insurance sales and the large number of related complaints and disputes involved, consumer finance companies basically did not carry out such business, so the business of "agency sales of insurance products related to consumer loans" was cancelled.
It is understood that this move aims to distinguish the basic business and special business scope of consumer finance companies, cancel non-main business and non-essential business, and strictly supervise business at different levels.
At the same time, the Consultation Paper also points out that it is necessary to appropriately broaden financing channels and enhance shareholders' liquidity support capabilities. For example, the Consultation Paper stipulates that major shareholders should replenish capital to consumer finance companies when necessary, and provide liquidity support to consumer finance companies when they encounter liquidity difficulties.
In terms of strengthening the supervision of corporate governance, the Consultation Paper fully implements the regulatory regulations and institutional requirements on corporate governance, shareholder equity, related party transactions and information disclosure issued by the State Administration of Financial Supervision in recent years, and clarifies the regulatory requirements for party building, "three committees and one layer", shareholder obligations, remuneration management, related party transactions and information disclosure in combination with the organizational form and shareholding structure of consumer finance companies.
The balance of the guarantee credit enhancement business shall not exceed 50% of the loan balance
In terms of strengthening risk management, the Consultation Paper also clarifies the regulatory requirements for credit risk, liquidity risk, operational risk, information technology risk, reputation risk management and other aspects of consumer finance companies, optimizes the addition of some regulatory indicators, and improves the market exit mechanism.
What are the new regulatory indicators?
According to the person in charge of the relevant department of the State Administration of Financial Regulation, consumer finance companies have cooperated with financing guarantee companies, insurance companies and other institutions as a means of risk mitigation for loans based on the needs of risk prevention and control. However, some consumer finance companies have long relied too much on the development of this model, relaxed the substantive review of the borrower's credit qualification level, lacked independent risk control capabilities, and also faced the risk that the guarantee company would not be able to compensate. In addition to paying the interest on the loan, the borrower also needs to pay a guarantee fee, which indirectly pushes up the overall interest rate of the loan.
The Consultation Paper stipulates that the balance of the guarantee credit enhancement business of a consumer finance company shall not exceed 50% of the total loan balance of the company, and a certain period of rectification and transition will be granted in the future. In addition, consumer finance companies are required to have a leverage ratio of no less than 4% to limit blind expansion.
In terms of strengthening the protection of consumer rights and interests, the Consultation Paper consolidates the main responsibilities of consumer finance companies for consumer protection, improves and improves various mechanisms for consumer protection work, strengthens the standardized management of cooperative institutions, and practices the political and people's nature of finance.
The above-mentioned person in charge said that consumer finance companies mainly serve long-tail customers such as low- and middle-income customers, and the "Draft for Comments" has added two special chapters of "Consumer Rights and Interests Protection" and "Management of Cooperative Institutions" to more prominently strengthen the protection of consumer rights and interests. Specifically, there are two aspects:
The first is to consolidate the main responsibility of consumer protection of consumer finance companies. It is required to incorporate the protection of consumer rights and interests into corporate governance, establish and improve the consumer protection work mechanism, establish a consumer rights protection committee, improve the consumer protection information disclosure mechanism and personal information protection system, and strengthen the management of consumer suitability.
The second is to strengthen the restraint and management of cooperative institutions. Consumer financial companies are required to strengthen the management of the access and concentration of cooperative institutions, conduct continuous management and evaluation of cooperative institutions, clarify the prohibitive provisions of cooperative institutions, and avoid infringement of the legitimate rights and interests of consumers due to non-standard collection by cooperative institutions, especially collection agencies;