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China’s Private Banks May Not Be Allowed to Work With Unlicensed Lenders to Make Loans

By Han Yi, Wu Hongyuran and Leng Cheng
The China Banking Regulatory Commission (CBRC) has recently proposed segregating licensed but smaller privately owned banks from unlicensed but potentially more-resourceful lenders. Above, the outside of the CBRC building in Beijing is seen in January 2010. Photo: Visual China
The China Banking Regulatory Commission (CBRC) has recently proposed segregating licensed but smaller privately owned banks from unlicensed but potentially more-resourceful lenders. Above, the outside of the CBRC building in Beijing is seen in January 2010. Photo: Visual China

China is considering forbidding privately owned banks from joining with unlicensed lenders to create larger loan pools — the central government’s latest effort to pre-empt credit risks outside the mainstream banking system.

Privately owned banks, which are usually small, often struggle with limited access to the funding they need to make loans. Over the past several years, these banks usually teamed up with other financial institutions, some of which were unlicensed lenders, to create a large enough pool of loans. For instance, Weilidai, a key product of WeBank, teamed up with 25 banks to fund about 80% of its loan portfolio.

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