CFIC Introduction
The person in charge of the relevant department of the State Administration of Financial Supervision and Administration said that the key revisions of the "Measures" include: First, clarifying the regulatory orientation, requiring banks to better support the development of the real economy when carrying out syndicated loan business, and at the same time effectively prevent and resolve risks. The second is to enrich the syndicate formation model, optimize the distribution ratio and the rules for secondary market transfer, and improve the convenience of carrying out syndicated loan business. The third is to standardize the principles and methods of syndicated fees, and further improve the syndicate pricing mechanism. Fourth, it puts forward more systematic requirements for the management of syndicated loans.
According to the website of the State Administration of Financial Supervision on October 12, the bureau revised the "Guidelines for Syndicated Loan Business" and formed the "Administrative Measures for Syndicated Loan Business".
The Measures enrich the syndicate formation model, optimize the distribution ratio and the rules for secondary market transfers. These include the inclusion of the group syndicate model, adjusting the lower limits of the loan commitment share and distribution share of a single bank as the lead bank from 20% and 50% to 15% and 30% respectively, and allowing banks to transfer part of the balance or loan amount of the syndicated loan.
Clarify regulatory orientation
The Measures are divided into seven chapters and 61 articles, including general provisions, syndicate members, initiation and organization of syndicated loans, syndicated loan contracts, syndicated loan management, syndicated loan transfer transactions and supplementary provisions.
In response to reporters' questions, the person in charge of the relevant department of the State Administration of Financial Supervision and Administration said that the key revisions of the "Measures" include: First, it clarifies the regulatory orientation, requiring banks to better support the development of the real economy when carrying out syndicated loan business, and at the same time effectively prevent and resolve risks.
The second is to enrich the syndicate formation model, optimize the distribution ratio and the rules for secondary market transfer, and improve the convenience of carrying out syndicated loan business.
The third is to standardize the principles and methods of syndicated fees, and further improve the syndicate pricing mechanism.
Fourth, it puts forward more systematic requirements for the management of syndicated loans.
In addition, the revision revises the "Guidelines" to "Measures", and adds relevant content such as supervision and management.
From March 22 to April 20, 2024, the Measures will be open to the public for comments. The person in charge said that compared with the draft for comments, the officially released "Measures" have been improved mainly in the following aspects: First, the definition and grouping standards of grouped syndicates have been optimized, which is conducive to the comparative implementation of banks and the formation of syndicates. The second is to improve the relevant provisions on the distribution ratio, and increase the restrictions on the distribution ratio when setting up joint lead banks and deputy lead banks, so as to better promote inter-bank cooperation and diversify risks. The third is to further clarify the relevant requirements for syndicated loans, and authorize industry self-regulatory organizations to further standardize syndicated loan fees. Fourth, the preferential right of transfer and the scope of transferee in the transfer of syndicated loans have been revised to better meet the actual needs of secondary market transfers.
Boost the motivation of banks
According to the person in charge, the "Measures" have optimized the requirements for banks to carry out syndicated loan business in terms of organization mode, distribution ratio and secondary market transfer.
According to the above-mentioned person in charge, from the perspective of the organization model, the "Guidelines" stipulate that syndicated loans should be based on the same conditions, and the "Measures" include the group syndication model, which has changed the current status quo of the relatively single syndication model and enhanced the enthusiasm of banks to carry out syndicated loan business.
The person in charge further explained that banks can provide loans with different conditions to customers in the same syndicated loan contract by grouping loan conditions such as term and interest rate. In general, there are no more than three groups of group syndicated loans, and in principle, two or more banks are required to participate in each group, and no more than one group with only one bank is required, and a unified correspondent bank shall be set up.
The person in charge said that from the perspective of distribution ratio, the "Measures" in accordance with the principle of taking into account efficiency and risk diversification, the lower limit of the principle of loan share and distribution share when a single bank serves as the lead bank is adjusted from 20% and 50% to 15% and 30% respectively; The requirements for the share of loans when setting up deputy lead banks and joint lead banks are added, stipulating that the share of loans undertaken by each lead bank shall not be less than 10% of the amount of syndicated financing in principle, and the share of loans undertaken by each bank shall not be higher than 70% in principle.
At the same time, from the perspective of secondary market transfers, the Measures allow banks to transfer part of the balance or commitment amount of the syndicated loan, but only in the form of a proportional split of the outstanding principal and interest as a whole.
"This can further activate the secondary market of syndicated loans and release precipitated credit resources." The person in charge said that banks should, in accordance with relevant regulatory provisions, carry out centralized registration in advance on credit asset registration and circulation platforms approved by the State Financial Supervision and Administration such as the Banking Credit Asset Registration and Circulation Center, and carry out transfer transactions.
Clarify the responsibilities of the lead bank and the correspondent bank
The Measures make it clear that, according to the functions and division of labor in the syndicated loan, the syndicate members are usually divided into the roles of the lead bank, the agent bank and the participating bank, and can play cross-positions.
In view of the current chaos in the setup of the lead bank and the correspondent bank, such as multi-headed management, the Measures further clarify the responsibilities of the lead bank and the agent bank.
The person in charge said that the "Measures" stipulate that the lead bank and the agent bank should have the corresponding business capabilities and professionals, and for more complex syndicated loans, a deputy lead bank, a joint lead bank, or a corresponding agent bank can be set up for different affairs, but only one agent bank can be set up for the same transaction. Each lead bank and the agent bank shall jointly perform the duties of the lead bank or agent bank in accordance with the provisions of the Measures and the contract. At the same time, it is clarified that the syndicated loan shall be collected, issued and recovered by the correspondent bank in a unified manner, and it is strictly forbidden for all syndicate members to directly issue and recover the loan by bypassing the correspondent bank.
Source of this article: China Securities Journal
Author: Chen Lu
WeChat editor: Gu Shuxu
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