China’s Banking Regulator Cracks Down on Fintech-Fueled Joint Lending

What’s new: China’s banking regulator barred joint-stock banks from funneling funds to third parties in a crackdown on the fintech-fueled boom in joint-lending deals.

Hundreds of banks and other financial institutions have joined in pooling funds for lending, including Ant Group, Tencent-backed online bank WeBank and Ping An Easy Money, a unit of China’s largest insurer, Ping An Insurance. Joint lending backed by such partnerships has surged to 2 trillion yuan ($283 billion), Caixin learned from regulatory sources.

The China Banking and Insurance Regulatory Commission (CBIRC) issued a new guideline in September after finding problems in the joint-lending market in a probe of a bank, a property insurance company and a third-party institution, according to a person at a joint-stock bank.

The regulator ordered that joint-stock banks improve their risk control and refrain from outsourcing key monitoring responsibilities, such as customer identity verification, contract signing and credit approval.

The background: Fintech companies’ massive client base has attracted many small and medium-sized banks to seek lending partnerships. Internet companies often repackage funds provided by banks into higher-interest consumer loans and sometimes put their own money into the pool, making some products similar to syndicated loans.

The joint-lending boom raises concerns over risk controls, potential for contagion in a financial crisis, and lagging supervision, industry and regulatory experts say.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

Related: In Depth: Cheers and Fears in $283 Billion Bank-Tech Lending Tie-Up

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