Measures for Administration of Pilot Consumer Financial Companies
Source: CBRC View: 409 Date: 2011-05-16

Chapter 1 General Provisions


Article 1 For the purpose of facilitating consumer financial industry and regulating the practices of non-bank financial institutions with respect to consumer finance business, the Measures herein have been formulated in accordance with the Law of the People’s Republic of China on Supervision and Administration of the Banking Industry, the Company Law of the People’s Republic of China and other laws and regulations.

Article 2 The “consumer financial companies” herein refer to the non-bank financial institutions established in the People’s Republic of China upon approval of the China Banking Regulatory Commission (CBRC) in the principle of no absorption of deposits of the public and provision of small-amount dispersive loans with a view of providing loans to the residents of China for their consumption.

Article 3 The name of a consumer financial company shall contain the words of “consumer finance”. Without approval of the CBRC, no unit may use “consumer finance” in its name.

Article 4 The CBRC and its dispatched agencies shall administrate and supervise consumer financial companies as well as their business activities.


Chapter 2 Establishment, Change and Termination


Article 5 A consumer financial company applying for establishment shall satisfy the following conditions:

(1) Having an Articles of associations in accordance with the Company Law of the People’s Republic of China and provisions of the CBRC;

(2) Having qualified contributors;

(3) With the registered capital no less than the minimum amount as provided herein;

(4) Having qualified directors and senior managers and qualified staff familiar with consumer finance business;

(5) Having sound systems with respect to corporate governance, internal control, business operation and risk management;

(6) Having business sites, safety measures and other facilities fit for its business operation; and

(7) Other prudent conditions as provided by the CBRC.
 

Article 6 The main contributor of a consumer financial company shall be domestic or overseas financial institutions and other contributors approved by the CBRC, and satisfy the following conditions:

(1) Having over five-year practice experience in the consumer financial field;

(2) The total assets by the end of the year in last year is no less than RMB60bn or the equivalent amount of any convertible currency (on consolidated accounting statement basis);

(3) Having good financial standing and earning profits in the recent two fiscal years (on consolidated accounting statement basis);

(4) Having good reputation without any record of material irregular and illegal operations in the recent two years;

(5) The contributed capital shall be from an accurate and legitimate source and no loan funds and entrusted funds may be used as contributed capital;

(6) Making a commitment that its/his equities of the consumer financial company will not be assigned within three years (except as otherwise required by the CBRC), which shall be written in the Articles of association of the company to be established;

(7) Having a sound corporate governance structure, internal control mechanism and risk management system;

(8) Satisfying the monitoring requirements of the relevant monitoring departments;

(9) In case of an overseas financial institution, it shall have its representative office in China for more than two years or have established a branch and have a sufficient analysis and research of Chinese market; moreover, the financial monitoring authority in the country or region where the institution is located has established a good cooperative mechanism with the CBRC on administration and supervision; and

(10)Other prudent conditions provided by the CBRC.

Article 7 In addition to the provision that the general contributor of a consumer financial company shall satisfy the conditions of Article6 (3), (4), (5), (6), (7), (8) and (9) herein, for a financial institution, its registered capital shall be no less than RMB300mn or the equivalent amount of any convertible currency, and for a non-financial institution, its rate of net assets shall be no less than 30 percent.

Article 8 The registered capital of a consumer financial company shall a one-off paid-in money capital and the minimum amount is RMB300mn or the equivalent amount of any convertible currency.

The CBRC may adjust the minimum amount of the registered capital according to the development of consumer financial business and prudent supervision and administration.

Article 9 A consumer financial company may establish branches upon approval of the CBRC according to the needs of business development. The specific conditions for establishment of a branch shall be formulated by the CBRC separately. Without approval of the CBRC, no consumer financial company may conduct business outside the administrative region where it is registered.

Article 10 The CBRC executes the qualification approval system for the directors and senior managers of a consumer financial company.

Article 11 A consumer financial company shall report to the CBRC for approval for any of the following issues:

(1) Change of its name;

(2) Change of its registered capital;

(3) Change of ownership or adjustment of ownership structure;

(4) Change of the domicile or business sites of the company;

(5) Revision of the Articles of association;

(6) Change of any director and senior manager;

(7) Adjustment of business scope;

(8) Change form of organization;

(9) Merger or division; or

(10)Other issues concerning changes as provided by the CBRC.

Article 12 In any of the following circumstance, a consumer financial company may dissolve upon approval of the CBRC:

(1) Where the operating period as specified in the Articles of association is expired or occurrence of other issues resulting in dissolution as specified in the Articles of association;

(2) Where the power agency as specified in the Articles of association decides to dissolve;

(3) Where the company has to be dissolved due to merger or division; or

(4) Other legal particulars.

Article 13 Where a consumer financial company is terminated due to dissolution, cancellation according to law or announced bankruptcy, liquidation issues shall be handled in accordance with the relevant laws and regulations of China.

Article 14 The administrative license procedures for the establishment, change and termination of a consumer financial company and the approval of the qualification of its directors and senior managers shall be subject to the provisions of the CBRC.

Article 15 Where the establishment, change and operation of a consumer financial company involve any issues concerning foreign exchange control, the relevant provisions of China on foreign exchange control shall be complied with.

Chapter 3 Business Scope and Operation Rules


Article 16 A consumer financial company may operate the following Renminbi business partly or totally upon approval of the CBRC:

(1) Loan for personal consumer durables;

(2) Loan for personal consumption for general purposes;

(3) Assignment of credit assets;

(4) Inter-bank lending within China;

(5) Loan from domestic financial institutions;

(6) Issuance of financial bonds upon approval;

(7) Consulting and agency business relevant to consumer finance;

(8) Sale of insurance products related to consumption loan on commissioned basis

(9) Securities investment business with fixed incomes;

(10)Other businesses approved by the CBRC.

Article 17 A consumer financial company shall provide loans for personal consumption for general purposes to borrowers who have applied for loan for consumer durables with the company and have good payment records.

Article 18 The balance of the consumption loan of a consumer financial company to any individual shall not exceed five times the monthly income of the borrower.


Chapter 4 Administration and Supervision


Article 19 A consumer financial company shall establish a sound corporate governance structure and internal control system, formulate business operation rules and set up a comprehensive and effective risk management system according to the relevant provisions of the CBRC.

Article 20 A consumer financial company shall observe the following requirements by administration and supervision:

(1) The rate of capital sufficiency shall be no less than 10%;

(2) The inter-bank lending percentage shall be no higher than 100% of the total assets;

(3) The rate of sufficiency of reserves for loss on assets shall be no less than 100%; and

(4) The balance of investment shall be no higher than 20% of the total assets.

The measures for calculating the index above shall be accorded with the relevant provisions of the CBRC on non-onsite statement index monitoring system.

Article 21 A consumer financial company shall establish a prudent reserve system for asset depreciation according to the relevant provisions and withdraw the said reserves on full amount in a timely manner.

Article 22 A consumer financial company shall establish a risk pricing mechanism for the interest rate of consumption loans and set down the interest rate level for consumption loans within the scope permitted by laws and regulations according to the factors including capital cost, risk cost, requirements on return on assets and market price, so as to ensure pricing can cover risks.

Article 23 A consumer financial company shall establish an effective risk management system and reliable business operation procedures to identify false application information and avoid fraud.

Article 24 If there is a need for business outsourcing, a consumer financial company shall establish the policies and management systems relevant to the business outsourcing, including decision procedures for business outsourcing, appraisal and management of those providing outsourcing services, measures for keeping business information confidential and safe and emergency plans.

A consumer financial company shall report to the CBRC about the main risks and the corresponding risk prevention measures concerning the business outsourcing agreements before conclusion of the said agreements.

A consumer financial company shall not outsource businesses closely related to loan decision-making and core technologies for risk control.

Article 25 A consumer financial company shall refer to the relevant provisions of the Measures for disclosure of Information by Commercial Banks to establish an information disclosure system to disclose information including accounting statements, risk management situation, corporate governance and annual highlights etc. in a timely manner.

Article 26 A consumer financial company shall prepare and submit accounting statements and other statements required by the CBRC to the CBRC.

Article 27 A consumer financial company shall establish a regular external auditing system and submit the annual auditing report with signature of its legal representative to the CBRC within four months since the end of every fiscal year.

Article 28 A consumer financial company shall accept the examination of the CBRC according to law and shall not refuse or block such examination.

The CBRC may designate an accounting firm, if necessary, to make an auditing of the consumer financial company about its business, finance, risk and internal control system and implementation.

Article 29 A consumer financial company is obligated to keep secret of the personal information provided by borrowers and shall not release such information to the outside.

Article 30 Where any borrower fails to pay the principal and interests of his loan as agreed in the contract, a consumer financial company shall take legitimate measures to urge him to pay back, while no wrongful measures including menace, threat and harassing.

Article 31 Where any consumer financial company violates the provisions herein, the CBRC may order it to make corrections within a prescribed limit; if it fails to make any correction, or its practices seriously jeopardize the sound operation of the consumer financial company and the legitimate rights and interests of its clients, the CBRC may take measures of supervision and administration including suspending its business and restricting the rights of its shareholders according to different situations in accordance with the Law of the People’s Republic of China on Regulation and Supervision over the Banking Industry and other relevant laws and regulations.

Article 32 Where a consumer financial company has been or may be suffered from credit crisis which may bring serious impacts on the legitimate rights and interests of its clients, the CBRC may take it over or promote its reconstruction according to law. Where a consumer financial company has any of the circumstances of illegal operation or poor operation, and its existence may seriously jeopardize financial order and the public’s interests, the CBRC is entitled to cancel the company.


Chapter 5 Supplementary Provisions


Article 33 The main contributor as mentioned in Article6 herein refers to the contributor whose contribution percentage is no less than 50% of the registered capital of the consumer financial company to be established. The general contributors as mentioned in Article7 herein refer to other contributors other than the main contributor.

Article 34 The loan for personal consumer durables as mentioned in Article16 herein refers to the loan granted by a consumer financial company through dealers to the borrower for his purchase of the agreed consumer durables including household appliances and electronic products (exclusive of house and automobile).

Article 35 The loan for personal consumption for general purposes as mentioned in Article16 and 17 herein refer to the loan directly granted by a consumer financial company to the borrower for his consumption issues including personal and family travel, wedding, education and house decoration.

Article 36 The establishment of a consumer financial company by any contributor from Hong Kong, Macao and Taiwan shall be subject to the conditions for overseas contributors.

Article 37 The “over” or “above” mentioned herein includes the number or level specified.

Article 38 The Measures herein are subject to the interpretation of the CBRC.

Article 39 The Measures herein shall enter into force as of the date of promulgation.
 

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