Regulators again mention that "credit funds are strictly prohibited from flowing into the stock market" More than 10 banks have been named this year

According to the latest news, the State Council Information Office will hold a press conference on October 12 to introduce the relevant situation of "increasing the countercyclical adjustment of fiscal policy and promoting high-quality economic development". Another positive is highly anticipated.

Driven by multiple favorable policies, the stock market has gradually hit new highs in terms of both indices and trading volumes, and at the same time, financial regulators have also begun to warn of capital risks.

According to public reports, the financial management department has issued window guidance to commercial banks, requiring financial institutions to attach great importance to investor suitability management and investor protection, strengthen internal control and compliance management, and strictly control leverage.

Some local bankers stressed that they have not yet learned about the relevant window guidance and its specific contents, but the requirement that credit funds are strictly prohibited from flowing into the stock market in violation of regulations has not changed.

At the same time, the new special loan also has a clear purpose and loan object requirements, and retail investors illegally use loan funds for stock speculation is completely different, the industry is still waiting for the supervision of the specific supporting business rules of the above two policy tools, it is expected that there will be higher requirements for access threshold, and at the same time the need for strict and transparent capital supervision measures.

A number of banks have issued risk warnings

A number of banks have officially announced yesterday that "credit funds are strictly prohibited from flowing into the stock market in violation of regulations".

For example, a rural commercial bank in Guangdong issued a message saying that according to the relevant regulations of the national financial regulatory department on credit funds, credit funds shall not flow into the real estate market in violation of regulations, and shall not be used for stocks, futures, financial derivatives and other purposes prohibited by relevant national laws, regulations and rules.

The bank also said that if the customer flows credit funds in violation of the rules in the above-mentioned areas, once discovered, the bank will recover the loan in advance. Please strictly abide by the regulations of the national regulatory authorities and standardize the use of credit funds. It is hereby declared.

There are also media reports that a number of bank account managers in Beijing reminded in the circle of friends yesterday that consumer loans are limited to daily consumption of themselves and their families, and must not flow into the housing market, stock market, investment and wealth management and other illegal areas in any form. If there is any violation of the flow of funds, the bank has the right to declare the loan due in advance, invalidate the loan amount and even report to the personal credit report in accordance with the relevant provisions of the contract.

Some bank employees also told Dongfang Zise that banks have always been strict in investigating violations of credit funds, and have been relatively strict about the use of consumer loan funds. The practitioner particularly stressed that the funds from consumer loans must not enter the stock market.

More than 10 banks have been fined this year

Years ago, regulators banned bank credit funds from entering the stock market.

In 2006, the former China Banking Regulatory Commission (CBRC) issued a circular warning on the risk of bank credit funds directly or indirectly entering the stock market, requiring banks to strictly prohibit any enterprise or individual from misappropriating bank credit funds to directly or indirectly enter the stock market, and to take necessary measures to immediately recover the misappropriation of loans to buy and sell stocks.

Nevertheless, there are not a few banks that have been penalized for violating this provision. This behavior is also an "old problem" that is often named by regulators.

According to media statistics, since 2024, more than 10 banks have been punished by the regulatory authorities for "illegal inflow of funds into the stock market and property market". In particular, in July this year, the regulator issued 16 fines, involving 6 banking institutions and 10 relevant responsible personnel of banks.

According to the fine disclosed by the Zhejiang Supervision Bureau in August 2024, Xiaoshan Rural Commercial Bank was fined 4.5 million yuan for five violations of laws and regulations, including imprudent management of working capital loans and personal operating loans, and the funds were misappropriated to the stock market. In addition, Ni Hongbin, then vice president of the bank, and Wu Ming, general manager of the company's asset management department, were both warned and fined 300,000 yuan.

On July 10 this year, the Shanghai Regulatory Bureau once again disclosed a number of fines, and a number of banks in the same industry were fined for "illegal inflow of funds into the stock market and property market".

According to the fine disclosed by the Shanghai Supervision Bureau of the State Administration of Financial Supervision in July 2024, Shanghai Fengxian Pufa Village Bank was fined 950,000 yuan for four violations of laws and regulations, including inadequate post-loan management of personal consumption loans and illegal flow of loan funds into the stock market.

Jiading Minsheng Village Bank was fined 1.4 million yuan for illegal inflow of personal loan funds into the stock market, illegal inflow of working capital loan funds into the stock market, serious imprudent management of working capital loans, and serious violations of prudent business rules in the management of employee behavior.

Shanghai Jiading Hongdu Village Bank was fined a total of 1.7 million yuan for six violations of laws and regulations, including serious violations of prudential business rules in the credit management of operating property loans, illegal inflow of personal business loans into the stock market, and illegal inflow of personal consumption loans into the real estate market.

Some of the fines do not mention the illegal flow of funds into the stock market, but only indicate that the funds were used in prohibited areas in violation of the law.

For example, in July this year, the penalty information disclosed by the Shanghai Regulatory Bureau showed that the fine of the Shanghai branch of Zhejiang Chouzhou Commercial Bank exceeded 10 million yuan, reaching 10.85 million yuan. The bank's main violations of laws and regulations mentioned that personal loan funds were used in prohibited areas in violation of regulations. In addition, it also includes the provision of government financing in violation of regulations, the illegal use of working capital loans for fixed asset investment, and the serious violation of prudential business rules in the post-loan management of working capital loans.

In January this year, a penalty information from the Zhejiang Supervision Bureau showed that the Zhejiang branch of the Postal Savings Bank was misappropriated into the stock market due to illegal misappropriation of personal loan funds; misappropriation of personal loan funds into the housing market in violation of regulations; The "three checks" of loans were not in place, and working capital loans were misappropriated into the stock market; The working capital loan was misappropriated for trusts and other investments and other major violations of laws and regulations, and a combined fine of 6.45 million yuan was consolidated.

On January 15, a fine from the Yunnan Regulatory Bureau disclosed that the Lincang branch of the Bank of China had illegally flowed credit funds into the real estate market and securities market; illegal collection of entrusted payment transfer fees".

In accordance with Articles 21, 46 and 48 of the Banking Supervision and Administration Law of the People's Republic of China and relevant prudential operation rules, the Lincang Supervision Branch of the State Administration of Financial Supervision decided to fine the Lincang Branch of the Bank of China 450,000 yuan and issued a warning to Li Chaokun, then director of the bank's business department.

Wang Pengbo, chief analyst of the financial industry at Broadcom Consulting, said in an interview that the entry of low-interest consumer loans into the stock market is actually an act of increasing leverage, and once the market has an unfavorable market, the loss will be magnified due to the leverage effect, and if the stock price falls, the loss will far exceed the use of its own funds. For the financial market, it will obviously cause a mismatch of funds, amplify the asset bubble, and once there is a problem in the stock market, the risk will quickly spread to banks and other financial institutions, resulting in an increase in banks' non-performing loans and a decline in asset quality.

A few days ago, the Tianjin Supervision Bureau of the State Administration of Financial Supervision and Administration also reminded consumers to be wary of the risk of over-indebtedness and use personal consumption credit loans reasonably and compliantly. It pointed out that we should adhere to the concept of moderate debt and rational consumption, develop good habits of consumption and repayment, and not uncontrollably advance consumption and excessive debt. On the basis of not exceeding one's own affordability, reasonably give play to the role of consumer credit products in supporting consumption. Do not use personal consumption credit loans such as consumer installments and microfinance in violation of regulations in non-consumption fields such as financial management, investment, house purchase, and loan repayment, and avoid violations such as "using loans to support loans" and "using cards to support cards".