China to Score Consumer Finance Firms for Better Oversight
What’s new: China introduced a scoring system for the country’s consumer finance companies as part of efforts to tighten oversight of a booming sector that has attracted tech giants and financial conglomerates.
The China Banking and Insurance Regulatory Commission issued draft guidelines to assess consumer finance companies’ capacity to manage their corporate governance, risk, capital and information technology, the agency said Wednesday.
Companies will be divided into five groups for different levels of oversight based on annual assessments, the commission said. The new rules take effect immediately.
What’s the context: The new rules are part of broader efforts by Chinese regulators to step up scrutiny of credit risks, partly fueled by the boom of internet-based financial services.
While tightening rules for the online microlending sector, which has long been dominated by free-wheeling giants, regulators have been backing the development of licensed consumer finance companies to bolster lending amid the economic recovery.
China currently has 27 licensed consumer finance companies, mostly controlled by banks. Fintech giant Ant Group and Ping An Insurance (Group) Co. also set up such units.
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