On 17 August 2016, the China Banking Regulatory Commission (“CBRC”), Ministry of Industry and Information Technology (“MIIT”), Ministry of Public Security (“MPS”) and the Cyberspace Administration of China (“CAC”) jointly issued the Interim Measures for Administration of the Business Activities of Network-based Lending Information Intermediary Agencies 2016, with immediate effect.
The interim measures, which were first circulated in draft form in December 2015, regulate direct lending activities between natural persons, legal persons and other organisations through an internet platform (that is, a “network loan information agency”).
Under the interim measures, network loan information agencies must:
- Make a record-filing with the competent local office of CBRC and obtain relevant licences from the central or competent local office of MIIT before commencement of business.
- Conduct due diligence on lenders and impose related restrictions on loan amounts and loan targets.
- Appoint qualified custodians and segregate the funds of lenders and borrowers.
- Specify “P2P lending information intermediary” in their business scope.
Network loan information agencies are prohibited from:
- Providing guarantees.
- Lending, or offering financial products or brokerage or management services.
- Tying or bundling assets, or otherwise acting as a proxy (except as permitted under other rules).
- Engaging in crowdfunding and related activities.
Individuals may not borrow more than RMB200,000 from a single network loan information agency or RMB1,000,000 from all network loan information agencies. Legal persons and other organisations may not borrow more than five times these amounts. Network loan information agencies formed before the issuance of the interim measures must comply with the provisions of the interim measures within 12 months.
Harvey Lau, Partner, Baker & McKenzie, Shanghai
“Certain clarifications and additions have been included in the final official version. For example, now every P2P platform is required to specify “P2P lending information intermediary” in its business scope, which is more reasonable than the approach taken in the draft version, where a P2P platform was required to include this wording in its company name. In the final version, P2P platforms are prohibited from engaging in quasi-securitisation activities, and ceilings on the amount that a single lender may lend through a P2P platform and the aggregate amount that a single lender may lend through all P2P platforms are imposed. Further, local regulators will play an important role in the registration and supervision of P2P platforms. This approach is consistent with the general position that, while enhancing risk control, the regulators would allow certain flexibility to facilitate financial innovation.”
General Counsel for companies operating as a P2P lender, borrower, network loan information agency or custodian bank should inquire into the qualifications requirements and record-filing procedures for network loan information agencies, as well as the list of prohibited activities. This is to ensure compliance with the rules applicable to a P2P finance project, including the rules governing custodian banks, fund segregation and restrictions on borrowing. General Counsel for companies already operating in this space will want to take steps to implement strict compliance no later than August 2017.