THE government issued finalized guidelines on the internet loan business of commercial banks Saturday, in a move to promote the healthy development of the sector, the China Banking and Insurance Regulatory Commission (CBIRC) said in a notice.

The guidelines specified that when a commercial bank must jointly contribute funds to issue internet loans with a partner and the proportion of capital from the partner in a loan should not be less than 30 percent.

This came in line with a draft rule China published last November. The regulation will increase the potential capital needs for fintech platforms.

The CBIRC has found that some Chinese banks are poor in credit risk management, and they failed to divide the rights and responsibilities with their partners, which have harmed the foundation of healthy and sustainable development of the Internet loan business.

The balance of internet loans issued by a bank with one partner, including its related parties, must not exceed 25 percent of the bank’s net tier-one capital, it said.

In addition, the balance of internet loans issued jointly by commercial banks and cooperative institutions may not exceed 50 percent of the bank’s total balance, the guidelines state.

The CBIRC said that the rules will facilitate commercial banks to appropriately disperse internet loan business, avoid concentrating risk in relying on a single cooperative institution. In addition, it will allow sufficient space for the healthy development of internet loan business, the regulator added.

The guidelines said that a local bank cannot extend online loans outside its home base. In recent years, some local banks have used internet technology to disorderly expand their business areas which has created considerable risks, the CBIRC said.

In a separate Q&A document, the regulator said firms must comply with the new rules by July 17, 2022.(SD-Agencies)