On February 20, the China Banking and Insurance Regulatory Commission (CBIRC) issued the Notice on Further Regulating the Internet Loan Business of Commercial Banks (hereinafter referred to as “the Notice”) which specifies the requirements on risk management of Internet loan business jointly issued by commercial banks and their partners.

The day after the Notice was issued, Dr. Xiugen Mo, Vice President and Research Director of the Chinese Academy of Financial Inclusion (CAFI), was interviewed by China Daily. Dr.Xiugen Mo said that by setting quantitative indicators for the loan balance, the Notice aimed to manage the risks of the loans jointly issued by banks and Internet platforms and to avoid over-concentration of such loans on a handful of Internet platforms. In fact, it is imperative for regulators to encourage more Internet platforms and financial institutions to engage in online lending.

The Financial Times also reported different voices on this Notice. In particular, the specified requirements on the joint loans are actually asking commercial banks to engage in online lending on their own. “This may not visibly affect large banks, but for small and medium-sized banks, they will have to build their channels and be responsible for whole-process risk management on their own, which will pose a considerable challenge”, Financial Times reported.

What are your take on the Notice? Please leave your comment, and we will organize a seminar when the time is ripe.

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