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China regulator finalizes guidelines on banks' internet loan businesses

TechnologyFeb 20, 2021 08:30AM ET
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© Reuters. A man rides an electric bike past the CBIRC building in Beijing

SHANGHAI (Reuters) - China's bank regulator on Saturday tightened requirements on the internet loan business of commercial banks, amid heightened scrutiny of online lending by internet giants such as Ant Group Co, the finance arm of Alibaba (NYSE:BABA) Group Holding Ltd.

Commercial banks must jointly contribute funds to issue internet loans with a partner, and the proportion of capital from the partner in a loan should not be less than 30%, the China Banking and Insurance Regulatory Commission said in a notice.

The balance of internet loans issued by a bank with one partner, including its related parties, must not exceed 25% of the bank's net tier-one capital, it said.

In addition, the balance of internet loans issued jointly by commercial banks and cooperative institutions may not exceed 50% of the bank's total balance, the guidelines state. In a separate Q&A document, the regulator said firms must comply with the new rules by July 17, 2022.

The regulations will increase the potential capital needs for technology platforms such as Ant Group, which was on its way to raising $37 billion in an IPO based on its vast range of online lending services.

Those hopes were dashed when China's regulators intervened to halt the listing in November, over concerns that over-lending consumer debt would pose a threat to the country's financial system.

China regulator finalizes guidelines on banks' internet loan businesses
 

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Comments (2)
Siyun Chinn
Siyun Chinn Feb 20, 2021 1:12PM ET
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Right decision from China financial administration. Yes, Internet loan business would make the market more effectiant but it has potentially much higher risk than traditional banking system. See the difference between Canadian banking system and American's in the 2008 financial crisis.
Simon Liu
Simon Liu Feb 20, 2021 8:22AM ET
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To be honest, this is a real way to protect the ordinary people as borrowers.
Bryan Ojeda
Bryan Ojeda Feb 20, 2021 8:22AM ET
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The people do not need protection what they need is financial education.
travert xavier
travert xavier Feb 20, 2021 8:22AM ET
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people with financial education will not use this type of loan anyway.. so need protection.One of my Chinese colleague, working in IT have been in big trouble by accumulating this kind of debt with very high interest rate and complicated system. I don't know the details of the mechanics but he ended up having 2 to 3 time more to pay back than he borrowed in 6 month.. that's dangerous
 
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