Recently, according to the Securities Daily, the Banking Credit Asset Registration and Circulation Center released the "Annual Report on the Pilot Business of Non-Performing Loan Transfer (2023)", since January 2021, the pilot work of single-family non-performing loans to the public and batch of personal non-performing loans was officially launched, and the pilot expansion at the end of 2022 has been promoted, and the business has been promoted for more than three years, and the market is very concerned about the implementation status.
Status quo of non-performing loan transfer business
The report discloses a number of important data on the non-performing loan transfer market in 2023:
1. Number of pilot institutions.
By the end of 2023, a total of 266 institutions had opened 883 business accounts in Yindeng Center, of which the second batch of pilot institutions had opened a total of 226 pilot business accounts. The number of local asset management companies was expanded to 60.
2. The scale of asset package transfer.
The pilot business will achieve a significant increase in 2023, with 710 listings throughout the year, with a total outstanding principal and interest of 152.984 billion yuan, an increase of 234.97% year-on-year; 553 transactions were transacted, with a total outstanding principal and interest of 119.369 billion yuan, a year-on-year increase of 222.68%, an average principal recovery rate of 23.71%, and an average discount rate of 15.21%.
Among all types of institutions, national joint-stock banks and consumer finance companies accounted for the largest proportion of asset portfolios, accounting for 94.92% of the total outstanding principal and interest. A total of 8 urban commercial banks and 28 rural small and medium-sized banking institutions in 7 pilot provinces and cities have successfully implemented the transfer of non-performing loans, with a total of 109 transactions and a total of 8.21 billion yuan of outstanding principal and interest.
3. The scale of asset portfolio acquisitions.
25 local asset management companies are the most important asset portfolio transferees in the market, with a total of 387 acquisitions, with a total outstanding principal and interest of 95.427 billion yuan, an increase of 443.34% year-on-year, accounting for 98.85%.
4. The scale of batch transfer of personal non-performing loans.
In 2023, the volume of personal non-performing loan batch transfer business will increase significantly, with a total of 462 listings and 390 transactions, corresponding to 3,421,435 transactions of 2,798,889 non-performing loans, a total outstanding principal of 62.191 billion yuan, and a total outstanding principal and interest of 96.538 billion yuan, a year-on-year increase of 449.43%, a total transfer price of 4.644 billion yuan, an average principal recovery rate of 7.47%, and an average discount rate of 4.58%.
In 2023, the proportion of credit card overdraft assets in the total outstanding principal and interest of batch personal business increased significantly from 2.05% in 2022 to 39.15%.
From the above data, it can be seen that the pilot business of non-performing loan transfer in 2023 will be unprecedentedly hot, with a growth rate of more than 200% or even 400%, and the author further obtained the business data from the first quarter of 2022 to the first quarter of 2024 from the official website of Yindeng Center for comparison, so as to have a clearer understanding of the changes in the non-performing loan transfer market in 2022 and 2023:
1. The type structure of non-performing loan transfer business entities
(1) The type of transferor and the scale of business
In 2022, the six major banks and national joint-stock banks will be the main players, and by the first quarter of 2024, the business of policy banks, urban commercial banks, rural commercial banks, consumer finance companies and financial leasing companies will gradually increase, and although the proportion of national joint-stock banking business will still be the largest in 2024, it has dropped to less than 50%. In the first quarter of 2024, the business scale of city commercial banks increased by 10%, and the business of consumer finance companies increased by 43% in the third quarter of 2023.
(2) The type of transferee and the scale of business
(Unit: 100 million yuan)
Local AMCs are the most important asset transferees of the pilot business, with a market share of more than 50% and even 96.5%, but in the first quarter of 2024, the scale of the national AMC business exceeded that of local AMCs for the first time, with a market share of more than 50%, which is speculated to be related to the strict requirements of the regulator for AMCs to return to their main business, and the major AMCs' business in 2022 and 2023 is related to the major adjustment of the company's structure. Except for the transfer of 3.12 billion asset packages in the fourth quarter of 2022, AIC has basically not participated in the pilot again.
2. Announcement and listing of the pilot business of non-performing loan transfer from the first quarter of 2022 to the first quarter of 2024
In the third and fourth quarters of 2023, the number of asset portfolio listings surged, and the scale almost increased by 5 times, but after reaching a peak in the fourth quarter of 2023, it fell rapidly in the first quarter of 2024, basically returning to the level of the second quarter of 2023.
3. Transactions of the non-performing loan transfer pilot business from the first quarter of 2022 to the first quarter of 2024
The transaction scale of the asset package is basically the same as the listing scale, which also suddenly rose sharply in the third and fourth quarters of 2023, and fell sharply in the first quarter of 2024 to the level of the second quarter of 2023, while the ratio of trading volume to listing volume basically remained at about 80% in the same period, and supply and demand were basically balanced.
4. Transaction status of batch personal loan business
The scale of the personal loan batch business did not grow rapidly within half a year after the pilot expansion, and suddenly broke out in the third and fourth quarters of 2023, which is speculated to have little correlation with the policy expansion, and is at the same frequency as the sudden surge in the overall scale of the market, but the decline in the first quarter of 2024 is much larger than that of the market as a whole, and the scale is less than half of that in the second quarter of 2023.
5. Bulk personal loan business type structure
In 2022, the bulk personal loan business type is mainly based on personal consumption loans and personal business loans, and the proportion of credit card overdrafts in the third and fourth quarters of 2023 will suddenly increase, especially in the fourth quarter of 2023, reaching 28.89 billion yuan, accounting for 60.8%, while falling sharply to 12.2% in the first quarter of 2024.
The bank's non-performing ratio
In the past two years, the popularity of the pilot business of non-performing assets transfer is due to the rapid rise in the scale of non-performing assets of financial institutions, mainly the rapid growth of the scale of non-performing assets of banks, the economic downturn in the past two years, dragged down by the real estate explosion and local debt problems, the rapid spread of bank operating risks, with the release of the 2023 financial reports of various banks, the non-performing rates of various banks have been disclosed, the author has sorted out the non-performing rate data of 79 mainstream banks in China, including the six major banks, 12 major national joint-stock banks, There are 29 listed urban commercial banks, 13 listed rural commercial banks, and 19 private banks, comprehensively demonstrating the operational risks of various banks.
The above data reflects the following characteristics of the non-performing ratio of the banking industry in 2023:
1. The NPL rate of the six major banks and national joint-stock banks is lower than that of urban commercial banks and rural commercial banks, and the NPL rate of urban commercial banks is relatively high, and the problem of non-performing assets of private banks has begun to appear.
Based on the industry average of 1.63%, the six major banks are all below the average, and all of them are lower than in 2022; The three national joint-stock banks, Zhongxiaxia, Bohai and Hengfeng, are higher than the industry average, and except for Bohai Bank, the non-performing rate in 2023 is lower than that in 2022.
11 of the 29 listed city commercial banks have a non-performing rate higher than the industry average, and even 6 exceed 2%, Harbin Bank is the highest non-performing rate among all banks in this statistics, as high as 2.87%, and the banking industry will generally strengthen the pressure on non-performing assets in 2023, and the non-performing rate of Jiujiang, Guizhou, and Zhongyuan 3 banks in 2023 will be higher than in 2022.
Among the 13 listed rural commercial banks, 3 have a non-performing rate higher than the industry average, one Jiutai rural commercial bank has a non-performing rate higher than 2%, and 4 rural commercial banks have a higher non-performing rate in 2023 than in 2022.
The most surprising performance among private banks is Zhejiang MYbank, which has always been in the first echelon, with a non-performing rate of 2.28%, much higher than the industry average and much higher than other private banks, and other media reported that the capital of MYbank will shrink by 50 billion yuan in 2023, nearly 10%, according to the chairman of MYbank in his financial report speech, the asset shrinkage is an active adjustment made by MYbank to prevent and control risks. 6 of the 19 private banks have NPL rates higher than the industry average, one is the same as the industry average, 7 banks have higher NPL rates in 2023 than in 2022, and two banks have the same NPL rate as 2022.
2. In the past two years, the non-performing ratio of personal loans has generally increased.
In 2023, the NPL rate of each bank is generally higher than that in 2022, except for 8 banks that are lower than in 2022, the NPL rate of 51 banks has increased compared with the NPL rate in 2022, and one is the same; The non-performing rate of personal loans of 10 banks exceeded 2%, Harbin Bank and Jiutai Rural Commercial Bank even exceeded 5%, and Bank of Gansu exceeded 3%; The NPL ratio of 37 banks was higher than the total NPL ratio of the bank, and 23 banks were lower than the total NPL ratio. The above data performance can be basically confirmed by the peak scale of personal loan non-performing assets in 2023 disclosed by the personal loan pilot data of Yindeng Center.
3. In the past two years, credit card loans have grown the fastest in the scale of non-performing assets.
In response to the 2023 report of Yindeng Center, the scale of credit cards in the non-performing assets of personal loans has grown the fastest in the past two years, and the author has sorted out the data on the non-performing rate of credit cards, and since only some banks have disclosed credit card balances and non-performing rates in their annual reports, they have screened the data of 10 more representative banks, including three six major banks, three national joint-stock banks, three urban commercial banks, and one rural commercial bank:
Continue to compare the credit card NPL rate of the above 10 banks with the total NPL rate and personal loan NPL rate of the bank:
It can be seen that the non-performing rate of credit cards of the 10 banks is higher than the total non-performing rate and the non-performing rate of personal loans (except for Changshu Bank, which did not disclose the non-performing rate of personal loans), for example, Industrial Bank is even 3 times higher, and the non-performing rate of credit cards will reach 4.01% in 2022 and 3.93% in 2023; Ping An Bank is 2 times higher, reaching 2.68% in 2022 and further increasing to 2.77% in 2023. It can be seen that the report of Yindeng Center said that the non-performing credit card is the type of loan with the largest increase in the non-performing rate of banks in the past two years, and this situation is true. The total non-performing rate of 10 banks will decline in 2023, but the non-performing rate of credit cards of 5 banks will increase in 2023, and the non-performing rate of personal loans will also increase in three of them, and it is reasonable to speculate that the non-performing rate of credit cards of these three banks has dragged down the non-performing rate of personal loans, and Bank of Zhengzhou is even more special, its personal loan non-performing rate will decline in 2023, from 2.49% to 1.72%, but the non-performing rate of credit cards will not fall but rise, from 2.09% to 2.11%.
The dilemma of disposing of non-performing assets of personal loans
According to the data disclosed in the 2023 report of Yindeng Center, the total outstanding principal of the batch transfer business of personal non-performing loans was 62.191 billion yuan, the total outstanding principal and interest was 96.538 billion yuan, and the total transfer price was 4.644 billion yuan, with an average discount rate of 4.58%, far lower than the industry average discount rate of 15.21%. In 2021, the discount rate fell to a relatively reasonable 10-20%, and now the valuation is too low, indicating that the market is not optimistic about the personal loan non-performing asset disposal business. The main reason should be that the principal recovery rate is far lower than the industry average, with the industry principal recovery rate of 23.71% in 2023, while the recovery rate of personal loan principal is only 7.47%, reflecting the dilemma of personal loan non-performing asset disposal.
On the one hand, the bank vigorously builds a personal loan risk control system through the use of financial technology, and carries out strict risk control management before and after the loan, so as to effectively prevent and control the occurrence of non-performing personal loans from the source. In the case that the non-performing has been released from the balance sheet, the bank will receive a part of the recovery proceeds through self-collection. However, there is no such cost advantage for AMC, and if AMC buys a relatively large asset package, in which the non-performing personal loan borrowers are dispersed and the single amount is small, it will generate high collection costs.
In addition to the economic costs, the increasingly stringent regulatory environment for collection and the serious scarcity of judicial collection resources in recent years have also greatly increased the difficulty of disposing of non-performing assets of personal loans:
1. Policies and regulations issued on personal loan collection in recent years.
For AMC, the collection of personal loan asset portfolios is not only costly, but also faces increasingly stringent compliance regulations. In addition to the requirement of "prohibiting violent collection of non-performing loans, and strictly prohibiting the entrustment of institutions with records of illegal acts such as violent collection and criminal crimes" stipulated in Circular No. 26 of the 2021 Non-Performing Loan Transfer Pilot Program, the regulators have further strengthened the protection of the rights and interests of financial consumers in the past two years, and increased the intensity of supervision on personal loan collection and personal information protection, making personal loan collection more and more difficult:
(1) In December 2021, the China Banking Association issued the Notice on Printing and Distributing the Guidelines for Credit Card Collection of the China Banking Association (for Trial Implementation) to carry out self-discipline management of the industry. The notice stipulates that without the consent of the debtor, telephone calls and visits shall not be carried out between 22 p.m. and 8 a.m.; It is strictly forbidden to use methods such as "calling you to death" to call frequently to collect; It is strictly forbidden to collect from a third party who has nothing to do with the debt; It is strictly forbidden to threaten debtors on the grounds of being included in fictitious blacklists or fictitious bad credit databases, it is strictly forbidden to mislead debtors with false amounts, natures, or legal consequences, and it is not allowed to use harassment, intimidation, fraud, threats, or other improper means to carry out collections.
(2) In December 2022, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Administrative Measures for the Protection of Consumer Rights and Interests of Banking and Insurance Institutions, once again emphasizing that banking and insurance institutions should regulate collection behaviors and urge debtors to repay debts in accordance with laws and regulations. Strengthen the management of collection outsourcing operations, and before entrusting an external agency to carry out collection, appropriate methods shall be adopted to inform the debtor. Banking and insurance institutions shall not have the following circumstances in the process of collecting on their own or by entrusting external agencies: fraudulently using the names of administrative organs, judicial organs, etc. to carry out collection; Improper means such as violence, intimidation, and fraud are used to collect money; Adopt other means that violate laws and regulations and violate public order and good customs to carry out collection.
(3) In May 2023, the Internet Finance Association of China issued the "Guidelines for Post-Loan Collection Risk Control of Personal Online Consumer Credit in Internet Finance" for comments, which was deliberated and approved in April 2024. The guidelines once again refer to the restriction of violent collection, requiring financial institutions to protect the debtor's personal information and provide the debtor's personal information to third-party collection agencies in accordance with the principle of minimum and sufficient. It is required that no collection shall be made from unrelated third parties, collection shall not be made between 10 p.m. and 8 a.m., collection personnel shall not conceal their identities, debtors shall not be forced to raise funds and repay loans in violation of laws and regulations, and third-party collection agencies shall be subject to list management. The guidelines are applicable to commercial banks, consumer finance companies, microfinance companies and other financial institutions to carry out post-loan collection of personal online consumer credit, as well as to third-party collection agencies entrusted by financial institutions to carry out post-loan collection of personal online consumer credit.
(4) In October 2023, the Qingdao Supervision Bureau of the State Administration of Financial Supervision issued the Guiding Opinions on Regulating Internet Loans and Credit Card Collection, which is the first local collection guideline in mainland China. The "Guiding Opinions" clarifies the requirements for establishing a collection management system and strengthening the assessment and training of collection personnel, and emphasizes the management of outsourced collection, requiring financial institutions and external collection agencies to clarify the cooperation agreement and the obligations of both parties, standardize the collection behavior, and shall not use violence, intimidation and other serious illegal means to collect. At the same time, it is required that the debtor's detailed information and the amount owed shall not be disclosed when contacting a third party. In addition, it is not allowed to fraudulently use the name of administrative organs, judicial organs, etc. to carry out collection, nor shall it deliberately adopt expressions that may cause ambiguity.
(5) In March 2024, the State Financial Supervisory Administration (SAFS) revised the Measures for the Administration of Consumer Financial Companies, adding a new chapter dedicated to the protection of consumer rights and interests, which is known as the strictest collection supervision measures in history, clearly stipulating that collectors should use civilized and polite language when communicating with debtors, respect the personality and legitimate rights and interests of debtors, and strictly prohibit violent collection behaviors; The collector shall properly keep the debtor's personal information and shall not disclose it to unrelated third parties at will. In the collection process, the debtor's privacy should be ensured; The financial regulatory department shall supervise and manage the whole process of the collection activities of the company, ensure that the collection activities comply with laws, regulations and company policies, and will correct and deal with the collection behaviors that violate the regulations in a timely manner.
2. The Supreme People's Court tightens the supervision of judicial collection jurisdiction.
For personal loans, the cost of judicial collection is higher than that of ordinary loans, and not all of the non-performing assets transferred by banks are loans that have won the judgment or entered the enforcement procedure, and even if the judgment has been won or the enforcement procedure has been entered, it does not mean that the principal and interest will be actually enforced. Due to the scarcity of judicial resources, judicial collection not only consumes high monetary costs, but also consumes high labor costs and time costs. In 2023, the new changes in the Supreme People's Court's law enforcement thinking have greatly increased the difficulty of judicial collection of personal loans.
In March 2023, the Supreme People's Court ruled in the Civil Ruling (2023) Zui Gao Fa Min Zhi No. 26 that although the Personal Consumption Loan Contract signed by the parties to the case stipulates that the contract is signed by the Xicheng District People's Court of Beijing, the domicile of both parties is not in Beijing, and the place where the contract was signed cannot be proved to be Beijing, so there is no actual connection between the case and the Beijing Xicheng Court The case entered the agreed court through the jurisdiction of the agreement, which undermined the normal order of public law governing civil litigation, so the jurisdiction clause involved in the case was invalid. This means that the non-performing assets of personal loans will be subject to the jurisdiction of the third-party court under the agreement, and the path of centralized batch litigation will be found invalid by the Supreme People's Court, which will force the disposing party to seek decentralized litigation, which will increase the cost of asset package disposal exponentially.
In September 2023, the Supreme People's Court solicited opinions on the draft of the Provisions on Several Issues Concerning the Determination of the Applicable Law in Cases of Online Consumer Contract Disputes, Article 13 of which stipulates that "if a financial product contract concluded by way of an online platform stipulates that the domicile of a third party such as the transferee of creditor's rights at the time of the signing of the contract shall be the connection point of jurisdiction, and the parties claim to determine the jurisdiction on this basis, the people's court shall not support it". The purpose of this article is to emphasize that the jurisdiction of the case should be exercised by the place where the defendant is located or the place where the contract is performed, and that the competent court shall be determined to be the place where the parties are domiciled, the place where the contract is performed and the place where the contract is signed shall be the place where the agreed jurisdiction is outside the place where the parties are domiciled, the place where the contract is performed, the place where the contract is signed, and the place where the subject matter is located, shall not be supported by the people's court.
It can be seen that the traditional disposal method is facing severe challenges in the regulatory policy and legal environment, and the disposal of non-performing personal loans must create new paths, such as strengthening the construction of personal credit reporting systems and platforms such as the People's Bank of China, realizing the docking of personal credit reporting systems, back-end credit granting and loan monitoring systems of lending institutions, so that regulators, lending institutions, AMCs, etc. can share customer credit information, credit data and loan historical collection data; New financial technologies such as big data may not play a decisive role in the corporate loan business, but they are the key to victory in the personal loan business, which can greatly improve the efficiency and accuracy of collection. Strengthen the comprehensive collection capacity outside the judicial process, mediation, online arbitration, SMS collection, door-to-door collection, telephone collection, AI collection, debt redemption, restructuring, etc.
Recently, many places are trying to apply the new model of multiple dispute resolution with the integration of reminders and lawsuits to the field of personal loan collection, such as the above-mentioned Qingdao "Guiding Opinions", which mentions the establishment of an "integrated reminder and litigation" disposal system, and the data interconnection and interconnection between financial institutions, outsourcing agencies, mediation centers/law firms, and courts, so as to achieve "full reminders, adjustable and immediate mediation, and full response to litigation"; In 2024, Shanghai Pudong Development Bank and Shanghai Modern Service Industry Federation will also jointly launch a pilot implementation of the pre-mediation mechanism, which will first implement commercial mediation before resorting to the judicial department for banking and financial disputes, and add model clauses for pre-mediation when business negotiations and contract signing.
However, most of these innovative methods are still in the experimental stage, and it still needs time to improve, and there is no mature implementation plan that can be promoted, and there is also a lack of clear policy and regulatory basis and perfect supervision, for example, in the practice of "integration of urging and prosecuting" reported by the media, there are lawbreakers who practice "collection" in the name of "mediation". The new disposal path requires the joint efforts of the regulatory authorities, the judicial department, and all the property owners to promote it together.
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