CCTV News:According to the website of the State Financial Supervision Administration, in order to thoroughly implement the spirit of the Central Financial Work Conference, further strengthen the supervision of consumer finance companies, prevent financial risks, optimize financial services, and promote the high-quality development of the industry, the General Financial Supervision Administration revised and formed the Administrative Measures for Consumer Finance Companies (Draft for Comment) (hereinafter referred to as the Draft for Comment). The heads of relevant departments of the General Administration of Financial Supervision answered the reporter’s questions on relevant issues.
1. What is the revision background of the Draft for Comment?
The Measures for the Pilot Management of Consumer Finance Companies (Order No.2 of China Banking Regulatory Commission in 2013) has played an important role in guiding consumer finance companies to adhere to the functional orientation of professional consumer credit and promoting the basic role of consumption in the economy. After years of development, the business model and risk characteristics of consumer finance companies have changed significantly, and the existing methods can no longer meet the high-quality development and regulatory needs of consumer finance companies. At the same time, in recent years, the General Administration of Financial Supervision has issued a series of regulatory systems and regulations on corporate governance, equity management, consumer rights protection, etc. The Draft for Comment further supplements and improves the relevant contents in combination with the actual situation of consumer finance companies, and strengthens the connection with the current regulatory regulations.
2. What are the main revised contents of the Draft for Comment?
The Draft for Comment consists of 10 chapters and 79 articles. The revised contents mainly involve optimizing access policies, highlighting business classification supervision, strengthening corporate governance, strengthening risk management, paying attention to the protection of consumers’ rights and interests, standardizing the management of cooperative institutions, and improving the market exit mechanism.
The first is to improve access standards. Improve the index standards such as assets and operating income of major investors, as well as the minimum shareholding ratio requirements, and promote shareholders to actively play a supporting role and earnestly assume shareholder responsibilities; Increase the shareholding ratio of investors with experience in consumer finance business management and risk control, and give full play to the compliance and risk control role of such investors; Improve the minimum registered capital requirements of consumer finance companies and enhance their ability to resist risks. The second is to strengthen the supervision of business classification. Distinguish between basic business and special business scope, cancel non-main business and non-essential business, and strictly supervise business at different levels. Appropriately broaden financing channels and enhance shareholders’ liquidity support ability. The third is to strengthen corporate governance supervision. Fully implement the regulatory regulations and system requirements on corporate governance, shareholders’ equity, related party transactions and information disclosure issued by the General Administration of Financial Supervision in recent years, and clarify the regulatory requirements on party building, "three meetings and one layer", shareholders’ obligations, salary management, related party transactions and information disclosure in combination with the characteristics of consumer finance companies’ organizational form and equity structure. The fourth is to strengthen risk management. Clarify the regulatory requirements on credit risk, liquidity risk, operational risk, information technology risk and reputation risk management of consumer finance companies, optimize and add some regulatory indicators, and improve the market exit mechanism. The fifth is to strengthen the protection of consumer rights. We will tighten the main responsibility of consumer finance companies in consumer protection, improve the mechanisms of consumer protection work, strengthen the standardized management of cooperative institutions, and practice the political and people-oriented nature of finance.
3. Why does the Exposure Draft raise the minimum shareholding ratio of major investors of consumer finance companies?
The "Draft for Comment" will increase the shareholding ratio of major investors of consumer finance companies from not less than 30% to not less than 50%. The main considerations are as follows: First, from the perspective of regulatory practice in recent years, increasing the shareholding ratio of major investors is conducive to compacting shareholders’ responsibilities, enhancing shareholders’ willingness to participate in the company’s operations, giving full play to shareholders’ resource advantages and promoting shareholders’ active support. Second, it is conducive to improving decision-making efficiency and avoiding the problem of corporate governance failure and imbalance due to the relative dispersion of equity.
4. What adjustments have been made to the business scope of consumer finance companies in the Draft for Comment?
The "Draft for Comment" has optimized and adjusted the business scope of consumer finance companies and paid more attention to the main business. On the one hand, distinguish between basic business and special business. Seven businesses, such as issuing personal consumption loans and issuing non-capital bonds, will be included in the basic business, and four businesses, such as asset securitization business, fixed income securities investment business and consulting services related to consumer finance, will be included in the special business. On the other hand, cancel non-main business and non-essential business. In view of the high professionalism of insurance sales and the many related complaints and disputes involved, consumer finance companies basically did not carry out such business, so the business of "selling insurance products related to consumer loans as agents" was cancelled.
V. What new regulatory indicators have been added to the Draft for Comment?
Based on the demand of risk prevention and control, consumer finance companies cooperate with financing guarantee companies, insurance companies and other institutions as a means of risk mitigation of loans. However, some consumer finance companies have relied too much on this model for a long time, relaxed the substantive examination of the borrower’s credit qualification level, lacked the ability of independent risk control, and also faced the risk that the guarantee company could not compensate. In addition to paying the loan interest, the borrower also needs to pay the guarantee fee, which indirectly pushes up the comprehensive interest rate of the loan. The "Draft for Comment" stipulates that the balance of guarantee and credit enhancement business of consumer finance companies shall not exceed 50% of the total loan balance of the company, and a certain rectification transition period shall be given in the follow-up. In addition, the leverage ratio of consumer finance companies is required to be no less than 4% to limit blind expansion.
6. What considerations does the Exposure Draft have in protecting financial consumers?
Consumer finance companies mainly serve long-tail customers such as low-and middle-income customers. Two special chapters of "Consumer Rights Protection" and "Cooperative Organization Management" have been added to the Draft for Comment, which further highlights the protection of consumer rights. On the one hand, the main responsibility of consumer finance companies is compacted. It is required to incorporate the protection of consumer rights into corporate governance, establish and improve the working mechanism of consumer protection, set up consumer rights protection committees, improve the information disclosure mechanism and personal information protection system of consumer protection, and strengthen the appropriate management of consumers. On the other hand, strengthen the constraint management of cooperative institutions. Require consumer finance companies to strengthen the access management and concentration management of cooperative institutions, conduct continuous management and evaluation of cooperative institutions, clarify the prohibitive provisions of cooperative institutions, and avoid violations of consumers’ legitimate rights and interests due to irregular collection by cooperative institutions, especially collection agencies; Consumer finance companies are required to implement the main responsibility of collection management, formulate the performance appraisal and reward and punishment mechanism of collection agencies, carry out entrusted collection according to laws and regulations, and effectively protect the legitimate rights and interests of financial consumers.