The CBRC Revised and Re-issued the Administrative Measures on the Pilot Program of Consumer Finance Companies

 

Chapter 1 General Provisions

 

Article 1 For the purposes of promoting the development of consumer finance business and regulating the operations of consumer finance companies, these Measures are formulated pursuant to the Banking Supervision Law of the People's Republic of China, the Company Law of the People’s Republic of China and other applicable laws and regulations.

 

Article 2 The term “consumer finance company” mentioned herein means a non-banking financial institution established in the People’s Republic of China with the approval of China Banking Regulatory Commission (CBRC) that does not accept deposits from the public and that extends consumer loans to resident individuals in China under the principle of small amount and diversification.

 

Article 3 The term “consumer loan” mentioned herein refers to loans extended by consumer finance companies to borrowers for the purpose of consumption (excluding purchase of homes and cars).

 

Article 4 The name of a consumer finance company shall contain the words of “consumer finance”. No institution may use “consumer finance” in its name without approval of the CBRC.

 

Article 5 Consumer finance companies and their operations are subject to supervision and regulation of the CBRC and its local offices.

 

Chapter 2 Establishment, Alteration and Termination

 

Article 6 To apply for establishing a consumer finance company, the applicant shall meet the following criteria:

(1) Having a company constitution that conforms to the Company Law of the People’s Republic of China and the provisions of the CBRC;

(2) Having qualified contributors;

(3) With registered capital no less than the minimum amount required herein;

(4) Having qualified directors and officers and qualified staff familiar with consumer finance business;

(5) Having effectively Measures and policies regarding corporate governance, internal control, and risk management, and having a management information system fit for its business operation;

(6) Having business sites, safety measures and other facilities fit for its business operation; and

(7) Other prudent conditions required by the CBRC.

 

Article 7 The contributors of a consumer financial company shall be legal entities incorporated in China. Principal contributor refers to the largest contributor whose contribution is no less than 30% of the proposed consumer finance company’s total equity, and general contributor refers to contributors other than the principal contributor.

The principal contributor mentioned in preceding paragraph shall be a domestic non-financial company offering products that are fit for consumer loans or an overseas financial institution.

 

Article 8 For a financial institution to become the principal contributor of a consumer finance company, it shall meet the following criteria:

(1) It has over five-year practice experience in consumer finance field;

(2) The year-end total asset in the preceding year is no less than RMB 60 billion or an equivalent amount of any convertible currency (on a consolidated basis);

(3) It has good financial standing and remaining profitable in the recent two fiscal years (on a consolidated basis);

(4) It has good reputation, without any record of material noncompliance in the recent two years;

(5) The contributed capital shall be from a real and legitimate source and no loan funds and entrusted funds may be used as contributed capital;

(6) It has made a commitment that its stake in the consumer finance company will not be transferred within five years (except as otherwise required by the CBRC), and such commitment has been written in the constitution of the proposed company;

(7) It has sound corporate governance structure and internal control mechanism, and a well-established risk management system;

(8) It satisfies the prudent supervisory indicators and requirements prescribed by the supervisory authorities in its country (region) of domicile;

(9) In the event of an overseas financial institution, it shall have its representative office in China for more than two years or have established a branch and have sufficiently analyzed and studied the Chinese market; moreover, the financial regulating authority in its country (region) of domicile has established with the CBRC a good mechanism for supervisory and regulatory cooperation; and

(10) Other prudent conditions provided by the CBRC.

 

For a financial institution to become a general contributor of a consumer finance company, it shall satisfy the criteria set forth in paragraphs (3) to (9) of Article 8 and have a registered capital of no less than RMB 300 million or an equivalent amount of any convertible currency.

 

Article 8 For a non-financial company to become the principal contributor of a consumer finance company, it shall meet the following criteria:

(1) The operating revenue in the preceding year is no less than RMB 30 billion or an equivalent amount of any convertible currency (on a consolidated basis);

(2) The year-end net asset in the preceding year is no less than 30% of its total asset (on a consolidated basis);

(3) It has good financial standing and remaining profitable in the recent two fiscal years (on a consolidated basis);

(4) It has good reputation, without any record of material noncompliance in the recent two years;

(5) The contributed capital shall be from a real and legitimate source and no loan funds and entrusted funds may be used as contributed capital;

(6) It has made a commitment that its stake in the consumer finance company will not be transferred within five years (except as otherwise required by the CBRC), and such commitment has been written in the constitution of the proposed company; and

(7) Other prudent conditions provided by the CBRC.

 

For a non-financial company to become a general contributor of a consumer finance company, it shall satisfy the criteria set forth in paragraphs (2) to (6) of Article 9.

 

Article 10 The principal contributor of a consumer finance company can prescribe in the company constitution that where the consumer finance company is faced with payment difficulty, liquidity support shall be provided, and where capital impairment occurs due to operating failure, the deficiency shall be made up in a timely manner.

 

Article 11  A consumer finance company shall have at least one contributor who has over 5 years of experience in consumer finance management and risk control and whose contribution is no less than 15% of the proposed company’s total equity.

 

Article 12 The minimum registered capital of a consumer finance company shall RMB 300 million or an equivalent amount of any convertible currency which shall be a lump-sum paid-in monetary capital.

 

The CBRC may adjust the minimum amount of the registered capital in light of the development of consumer finance business and the needs for prudent supervision.

 

Article 13 A consumer finance company may establish branches in light of its business development needs, but subject to approval of the CBRC. The specific criteria for the establishment of branches will be prescribed by the CBRC separately.

 

Article 14 The qualifications of directors and officers of consumer finance companies are subject to approval of appropriate supervisors.

 

Article 15 A consumer finance company shall report to the CBRC for approval for any of the following issues:

(1) Change of company name;

(2) Change of registered capital;

(3) Change of ownership or adjustment of ownership structure;

(4) Change of company domicile or business sites;

(5) Revision of company constitution;

(6) Change of any director and senior office;

(7) Adjustment of business scope;

(8) Change of incorporation form;

(9) Merger or division; or

(10) Other changes required by the CBRC.

 

Article 16 In any of the following circumstances, a consumer finance company may dissolve upon the approval of the CBRC:

(1) Expiration of the operating period specified in the company constitution expires or appearance of other grounds for dissolution specified in the company constitution;

(2) A resolution to dissolve the company has been made by the governing body specified in the company constitution;

(3) Merger or division of the company; or

(4) Other statutory grounds.

 

Article 17 Where a consumer finance company is terminated due to dissolution, license revocation or announced bankruptcy, the liquidation shall be handled in accordance with applicable laws and regulations of China.

 

Article 18 The administrative licensing procedures regarding the establishment, alteration and termination of a consumer finance company and the qualifications of its directors and officers are subject to appropriate provisions of the CBRC.

 

Article 19 Where the establishment, alteration and operation of a consumer finance company involve issues concerning foreign exchange control, appropriate foreign exchange control regulations shall be abided by.

 

Chapter 3 Business Scope and Operation Measures

 

Article 20 A consumer finance company may be involved in some or all of the following Renminbi businesses upon the approval of the CBRC:

(1) Offering personal consumer loans;

(2) Accepting deposits of shareholders’ domestic subsidiaries and/or domestic shareholders;

(3) Borrowing from domestic financial institutions;

(4) Issuing financial bonds upon approval;

(5) Domestic inter-bank lending;

(6) Consumer finance related consulting and agency business;

(7) Selling consumer loan related insurance products;

(8) Fixed income securities investment; and

(9) Other businesses approved by the CBRC.

 

Article 21 Loans provided by a consumer finance company to any individual shall not surpass his/her risk tolerance, and the balance of consumer loans extended to any individual client may not exceed RMB 200,000.

 

Chapter 4 Supervision

 

Article 22 A consumer finance company shall establish a sound corporate governance structure and an internal control system, formulate business operation Measures and set up a comprehensive and effective risk management system according to relevant provisions of the CBRC.

 

Article 23 A consumer finance company shall meet the following supervisory requirements:

(1) The capital adequacy ratio shall not be lower than appropriate supervisory requirement of the CBRC;

(2) The balance of inter-bank borrowing shall not exceed 100% of its net capital;

(3) The adequacy ratio of provisions for asset impairment shall not be lower than 100%; and

(4) The balance of investments shall not exceed 20% of its net capital.

 

The methods for calculating above indicators are subject to the regulations of the CBRC regarding the indicator system for off-site supervision. The CBRC may make adjustments to above indicators in light of the needs for prudent supervision.

 

Article 24 A consumer finance company shall develop the policy concerning provisions for asset impairment pursuant to appropriate regulations and make timely and sufficient provisions for impaired assets accordingly. Where such provisions have not been made, profit distribution is not allowed.

 

Article 25 A consumer finance company shall establish a risk-based mechanism for pricing consumer loan rates and set the level of consumer loan rates to the extent permitted by laws and regulations in light of capital cost, risk cost, required return on capital and market price, so as to enable prices to fully cover the risks involved.

 

Article 26 A consumer finance company shall establish an effective risk management system and reliable business operation procedures to identify false application information and prevent fraud.

 

Article 27 If there is a need for business outsourcing, a consumer finance company shall establish outsourcing-related policies and management Measures, including decision-making procedures for business outsourcing, measures for the evaluation and management of outsourcing suppliers, business information confidentiality and security measures, and emergency response plans.

 

A consumer finance company shall report to the CBRC about the main risks and corresponding risk prevention measures concerning the business outsourcing agreements before the conclusion of the said agreements.

 

A consumer finance company may not outsource business activities that are closely related to loan decision-making and core technologies for risk control.

 

Article 28 A consumer finance company shall prepare and submit accounting statements and other statements required by the CBRC and/or its local offices in accordance with appropriate regulations.

 

Article 29 A consumer finance company shall establish the system of regular external audits, and submit to the CBRC and/or its local offices the annual audit report signed by its corporate representative within four months after the end of every fiscal year.

 

Article 30 A consumer finance company shall accept the supervisory review according to law and may not refuse or hinder such review. The CBRC and/or its local offices may commission an accounting firm, where necessary, to audit the consumer finance company on its operation, finance, risk, internal control system and implementation.

 

Article 31 A consumer finance company is obligated to maintain the confidentiality of personal information provided by borrowers and may not disclose such information without permission.

 

Article 32 Where any borrower fails to pay the principal and interests as agreed upon in the contract, a consumer finance company shall take legitimate measures for collection and may not resort to wrongful measures such as menace, intimidation and harassing.

 

Article 33 A consumer finance company shall, pursuant to applicable laws and regulations as well as supervisory requirements of the CBRC, properly protect the rights and interests of financial consumers. It shall follow the principle of openness and transparency and fully fulfill the duty of disclosure, so as to enable borrowers to clearly understand the loan amount, maturity, price and terms of repayment. Afore-said contents shall be clearly specified in the contract.

 

Article 34 Where a consumer finance company violates the provisions herein, the CBRC and/or its local offices may order it to make corrections within a given time; where it fails to correct, or its practices seriously jeopardize the robustness and soundness of its business operations and the legitimate rights and interests of its clients, the CBRC may take supervisory actions, including suspending its business and restricting the rights of its shareholders, as the case may be, in accordance with the Banking Supervision Law of the People's Republic of China, and other applicable laws and regulations.

 

Article 35 Where a consumer finance company has suffered or may suffer from credit crisis and the rights and interests of its clients have been severely affected, the CBRC may take over the consumer finance company or urge its reconstruction according to law. Where the existence of a consumer finance company will seriously jeopardize financial order and public interest due to its illegal operating practices and/or poor management and operation, the CBRC is entitled to revoke the license of such company.

 

Chapter 5 Supplementary Provisions

 

Article 36 The criteria for overseas contributors shall be applicable to contributors from Hong Kong, Macao and Taiwan.

 

Article 37 The phrase “over” and “more than” used herein are inclusive.

 

Article 38 These Measures are subject to interpretation of the CBRC.

 

Article 39 These Measures shall become effective as of January 1, 2004, and the Administrative Measures on the Pilot Program of Consumer Finance Companies (CBRC 2009 Order No. 3) shall be annulled therefrom.

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Copyright: China Banking Regulatory Commission
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