The Measures for the Administration of Consumer Financial Companies (Draft for Comments) was announced, and industry experts interpreted the key points of the amendment

China Net Finance, December 19 (Reporter An Ran Zhu Ling) On December 18, the State Administration of Financial Supervision issued the revised "Measures for the Administration of Consumer Financial Companies (Draft for Comments)" (hereinafter referred to as the "Measures"), which will be open to the public for comments from now until January 19, 2024.

Industry experts pointed out that compared with the current version, the Measures will improve access standards, strengthen business classification supervision, strengthen corporate governance supervision, strengthen risk management, and strengthen the protection of consumer rights and interests.

It is worth mentioning that, according to the official website of the State Administration of Financial Regulation, the Measures for the Administration of the Pilot Program of Consumer Financial Companies was issued in 2009 and revised for the first time in 2013. This also means that after ten years, the "Measures for the Administration of Pilot Projects for Consumer Financial Companies" has been revised again.

Optimize access policies and increase the shareholding ratio of major investors

According to the Measures, financial institutions, as the main investors of consumer finance companies, are required to increase their asset targets from "total assets of not less than RMB 60 billion or its equivalent in freely convertible currency (consolidated accounting statements)" to "total assets of not less than RMB 500 billion or its equivalent in freely convertible currency at the end of the most recent fiscal year".

The minimum registered capital of a consumer finance company has also been raised from "RMB 300 million or its equivalent in freely convertible currency" to "RMB 1 billion or its equivalent in a freely convertible currency".

A responsible person of the State Administration of Financial Supervision pointed out that the main purpose of raising the standards for the assets, operating income, and other indicators of major investors, as well as the minimum shareholding ratio, is to "encourage shareholders to actively play a supporting role and earnestly assume shareholder responsibilities," while raising the minimum registered capital requirement for consumer finance companies is conducive to enhancing their ability to resist risks.

This is in line with the spirit of the Central Financial Work Conference's "strict access standards and regulatory requirements for small and medium-sized financial institutions", which will help ensure the quality of shareholders of consumer finance companies from the source, reduce the responsibilities of major shareholders, and also help maintain a moderate competition pattern in the market. Dong Ximiao, chief researcher of Zhaolian, told China Net Finance.

Wang Shiqiang, a senior researcher at the Bingjian Science and Technology Research Institute, said that the shareholding ratio of major shareholders is too low, and the participation in the company's operation process may not be high, which is not conducive to the monitoring of business risks by major shareholders and the subsequent accountability. Increasing the shareholding ratio of major shareholders is conducive to the active participation of major shareholders in the company's operation, control business risks, and assume the main responsibility.

"In the past, the leverage ratio requirements of consumer finance companies were implemented with reference to the relevant policies of financial institutions, and they generally carried out business according to about 10 times the net capital. The new leverage ratio requirement of no less than 4% actually lowers the leverage requirement and helps consumer finance companies expand external financing. Wang Shiqiang said.

Some regulatory indicators have been added to strengthen the corporate governance of consumer finance

In terms of business scope, the Consultation Paper has been optimized and adjusted, strengthened the supervision of business classification, and focused more on the main responsibilities and main businesses. On the one hand, it distinguishes between basic business and special business. Seven businesses, including "issuance of personal consumption loans" and "issuance of non-capital bonds", will be included in the basic business, and four businesses, including "asset securitization business", "fixed-income securities investment business" and "consumer finance-related consulting services", will be included in the special business. On the other hand, non-main and non-essential businesses will be abolished, business hierarchical supervision will be strictly enforced, and financing channels will be appropriately broadened to enhance shareholders' liquidity support capabilities.

In terms of strengthening risk management, the Measures clarify the regulatory requirements for credit risk, liquidity risk, operational risk, information technology risk, reputation risk management and other aspects of consumer finance companies, optimize and add some regulatory indicators, and improve the market exit mechanism.

The Measures stipulate that the balance of the credit enhancement business guaranteed by a consumer finance company shall not exceed 50% of the total loan balance of the company, and a certain period of rectification and transition shall be granted in the future. In addition, consumer finance companies are required to have a leverage ratio of no less than 4% to limit blind expansion.

"The balance of the guarantee credit enhancement business and the leverage ratio of the consumer finance company, these two indicators are risk indicators related to the loan business involved in the consumer finance, reflecting the regulator's attention to the risk management of consumer finance, and will effectively guide the consumer finance company to pay attention to the quality of business risk and achieve intensive business cultivation within the scope of regulatory regulations. Su Xiaorui, a consumer finance expert, said.

It is worth mentioning that the Measures clearly state in the salary management section that more than 40% of the performance-based remuneration of senior managers of consumer finance companies and employees in positions with important impact on risks shall be deferred, and the deferred payment period shall generally not be less than 3 years, of which the proportion of deferred payment of performance-based remuneration of key senior managers shall be higher than 50%.

"In fact, senior managers are required to issue loans responsibly and prudently, and to consider the future bad debt situation, which is conducive to the healthy and long-term development of consumer finance companies. Wang Shiqiang said.

Establish and improve the working mechanism for consumer protection and strengthen the protection of the rights and interests of financial consumers

In terms of strengthening the protection of consumer rights and interests, the Consultation Paper consolidates the main responsibilities of consumer finance companies for consumer protection, improves and improves various mechanisms for consumer protection work, strengthens the standardized management of cooperative institutions, and practices the political and people's nature of finance.

Dong Ximiao said that in view of the sinking customer base of consumer finance companies and the general financial literacy of consumers, it is more prominent to strengthen the protection of consumer rights and interests, and it is required to establish and improve the working mechanism of consumer protection, strengthen the management of cooperative institutions, strengthen the management of consumer suitability, and implement the main responsibility of collection management.

In Dong Ximiao's view, in the next step, consumer finance companies should make more use of financial technology to improve the standardization and intelligence of collection. For example, Zhaolian has forged the core capabilities of digital and intelligent collection, providing collection solutions for more than 70 financial institutions, helping the industry reduce costs and increase efficiency, and standardize collection behaviors.

With the deepening of the digital economy, licensed financial institutions have made extensive use of technology to empower traditional businesses, which has exacerbated the information asymmetry between the institutional level and the financial consumer level。

(Editor in charge: Wang Chenxi)