On 28 December 2015, the China Banking Regulatory Commission (“CBRC”) circulated the Interim Measures on the Administration of the Business Activities of Network Loan Information Agencies (“Draft for Public Comment”) for public comment. The draft measures apply to businesses, referred to as network loan information agencies, which facilitate direct lending activities between natural persons, legal persons and other organisations over the internet by providing information on lenders, borrowers and loan financing projects, credit rating services, and so on.
Under the draft measures, network loan information agencies must:
- Verify borrower and lender qualifications.
- Provide objective, factual, comprehensive and timely information.
- Maintain complete and accurate records and report to an online lending central database to be created by the CBRC.
- Establish risk control measures.
- Terminate loan facilitation activities where they discover fraud or other circumstances that damage lenders.
- Assist the government in preventing money laundering and terrorist activities.
The draft measures prohibit network loan information agencies from:
- Using their network platform for personal fundraising activities.
- Issuing loans, providing loan guarantees or creating cash pools.
- Selling financial products or providing asset brokerage or management services.
- Making promises in relation to returns on loan principal or interest.
- Intentionally providing misleading information in relation to a financing project.
Borrowers and lenders are bound by principles of voluntariness, trustworthiness and personal risk, and are required to provide truthful, accurate and complete information.
Harvey Lau, Partner, Baker & McKenzie, Shanghai
“While the consultation paper does not mention the qualification of, or capital requirements for the P2P platforms, the filing by a P2P platform with the local regulators does not constitute recognition or evaluation of the P2P platform’s operational capability, regulatory compliance or credit standing. To a certain extent, it reflects the regulators’ position that the P2P business should mainly be driven by market forces, and the regulators’ involvements should be kept to the minimum. It also reflects the government’s desire to encourage further innovation to the financial industry, but at the same time keeping the risks at bay.”
General Counsel for companies operating in this sector or dealing with other businesses that operate in this sector should inquire into the qualifications requirements for network loan information agencies and become familiar with the record-filing procedures with CBRC, MIIT and the China Internet Network Information Center, or CNNIC. They also should study the “negative list” of prohibited business activities set forth in the draft measures.