December 15, 2017 / 2:41 AM / a month ago

China banking watchdog tightens rules for consumer finance firms - Securities Times

SHANGHAI, Dec 15 (Reuters) - China’s banking regulator has tightened rules for consumer finance firms, which have grown making small-scale loans to individuals and small companies, the business daily Securities Times newspaper said on Friday.

The move is the latest in a string of measures taken to clamp down on the sector, which lacks proper credit assessment of borrowers and risk controls.

In a circular sent to local branches, the China Banking Regulatory Commission (CBRC) said consumer finance firms would be banned from making loans to unapproved borrowers or putting money into areas like cash loans and campus loans.

The CBRC did not immediately respond to requests for comment.

China’s market for consumer finance has boomed to meet the demands of the country’s large under-banked population, leading to the emergence of small-loan firms offering mostly small, high-interest, loans.

The circular said consumer finance firms should be banned from using peer-to-peer platforms or third parties to extend loans to unapproved parties and should not put money into cash or campus loans as well as downpayment loans for property.

Consumer finance firms will be limited to investing in bonds and fixed income securities, the circular said.

There have been reports that consumer finance firms are currently investing in riskier assets like stocks.

Reporting by Adam Jourdan and Engen Tham; Editing by Sam Holmes

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