Caixin
May 15, 2018 07:45 PM
FINANCE

Government Shuffles Supervisors for Local Financing Businesses

Customers browse a Beijing pawnshop on Oct. 18. Photo: VCG
Customers browse a Beijing pawnshop on Oct. 18. Photo: VCG

The Ministry of Commerce has transferred oversight over financial leasing companies, commercial factoring firms and pawnshops to the China Banking and Insurance Regulatory Commission (CBIRC).

The move is the latest measure to strengthen financial supervisory coordination and address regulatory shortcomings — goals stressed during the National Financial Work Conference last year. While the People’s Bank of China and the CBIRC will formulate unified supervisory policy and provide guidance on how to implement it, they will give local authorities the scope to decide how best to implement the policy.

Shortly after the National Financial Work Conference, the State Council issued a document on preventing financial risk and deepening financial reform that asked local financial supervisory departments to expand their respective roles, especially in regard to 11 types of institutions: microloan providers, financing guarantee companies, regional equity exchanges, pawnshops, financial leasing companies, commercial factoring firms, local asset management companies (AMCs), regional investment firms, farmers’ specialized cooperatives, crowdfunding companies and local exchanges. Local financial supervision departments will be responsible for capital supervision, activity supervision and function supervision in these sectors, according to the notice.

An important question to ask is whether the government has invested the funds and personnel into the local agencies in proportion with their increased power, a person close to the central bank told Caixin. “There is a cost for strong regulation,” the source added.

Local financial bureaus, which are often staffed with just over a dozen people, lack the necessary personnel, specialized knowledge and supporting funds to accomplish their duties.

“With the rise of internet finance, more supervisory energy must be invested in unlicensed financial institutions,” a regulatory source in charge of internet finance risk told Caixin.

“The government has not given improving local supervisory resources the same level of consideration as it has to increasing their responsibilities,” the source said.

Rough estimates made by Caixin show that there are more than 8,600 microloan companies nationwide, around 9,000 financing guarantee firms, more than 8,000 pawnshops, 40 regional equity exchanges, more than 6,000 financial leasing companies, over 6,000 factoring firms, more than 50 local AMCs, more than 1.8 million farmers’ specialized cooperatives, and around 200 crowdfunding companies.

As part of moves to open China’s financial sector, the government will launch measures to encourage foreign investment in financial leasing before the end of this year, central bank Governor Yi Gang said during the Boao Forum for Asia earlier this year.

Contact reporter Liu Xiao (liuxiao@caixin.com)

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