On the evening of the 1st, the Office of the Leading Group for the Special Remediation of Internet Financial Risks and the Office of the Leading Group for the Special Remediation of P2P Online Loan Risks jointly issued the Notice on Standardizing and Rectifying the Cash Loan Business, clarifying the principles of this business and the detailed rules for standardizing and rectifying measures.

under the new regulations, where will the "cash loan" go? Can market chaos be effectively curbed? China News Service is a through-train interview expert and industry insider, and interprets this.

Clarify the business boundary

"The' cash loan' business meets the normal consumer credit demand of some groups, but there are also some industry chaos such as mixed fish and dragons, mud and sand." Xiao Xiang, head of the Strategic Research Department of China Internet Finance Association and vice president of the Internet Finance Standards Research Institute, pointed out to the China News Service that some "cash lending" institutions, under the banner of "inclusive finance", were engaged in usury and predatory lending. The spread of these chaotic phenomena and irregular behaviors will seriously disrupt the economic and social order, and there are great financial risks and social risks.

in view of the above situation, this notice clearly stipulates that online micro-loans will be cleaned up and rectified, the participation of banking financial institutions in "cash loans" business will be further regulated, the management of P2P peer-to-peer lending information intermediary business will be improved, and all kinds of illegal institutions will be dealt with more vigorously.

in Xiao Xiang's view, one of the highlights of relevant measures is to clarify the boundaries and principles of "cash loan" business, especially put forward requirements for classified rectification and disposal of related businesses of microfinance companies, banking financial institutions and P2P online lending institutions, which embodies the principles and ideas of "returning to the source, strengthening supervision, classifying and standardizing, and paying attention to long-term".

Guo Dagang, secretary-general of Beijing Online Lending Industry Association, pointed out in an interview with China Express that it is clear from the notice that the regulator is not simply and rudely "across the board" on the "cash loan" business, "but clearly defines what can't be done indiscriminately by drawing the bottom line".

Feng Yan, deputy director of the inclusive finance Department of China Banking Regulatory Commission, also revealed to reporters on the day of the release of the new regulations that the official will standardize the "cash loan" business in the form of a negative list in the future according to the problem-oriented principle.

Delineating the red line of supervision

At present, some cash lending institutions are expanding rapidly by means of "high returns covering high risks". However, the Supreme People's Court has clearly stipulated that the interest rate of private lending should be supported below 24% and not protected above 36%.

in view of this situation, the circular draws a red line: the comprehensive capital cost charged by various institutions to borrowers in the form of interest rates and various fees should comply with the provisions of the Supreme People's Court on private lending interest rates, and it is forbidden to issue or match loans that violate the relevant interest rate provisions of the law.

Zhou Zhihan, general manager of Kaixin Financial Services, believes that some institutions tried to evade supervision by changing "rate" into "fee". On the surface, it can "lower" the loan interest rate, "meet" the regulatory requirements, and attract users with lower interest rates. But in fact, some loan interest rates are levied in the form of loan fees, which increases the invisible cost and may mislead borrowers and increase the loan burden. The notice will uniformly include interest rates and handling fees in the cost of borrowing, or it will shake the business model of some cash lending institutions.

In addition, because "cash loan" is affected by many people with relatively low risk tolerance, once it is not controlled well, its risk spillover is very strong, and it may even directly turn into a social problem. For controlling risk transmission and financial deleveraging, the official said that a series of measures will be taken to strengthen the prudent management of the sources of funds of microfinance companies.

Zhou Zhihan pointed out that in fact, the registered capital and leverage ratio of small loan companies have been clearly stipulated in various places before. Judging from the existing policies, the maximum leverage ratio of small loan companies is generally about 2 times. "That is to say, in the case of controlling leverage, the transaction scale of cash loans will be suppressed."

Reiterating licensed operation

It is worth noting that "qualification" has become one of the key words in this notice. Officially, no organization or individual may engage in lending business without obtaining the qualification for lending business according to law.

for the lenders, the qualification examination and approval is further strict: the supervision department of microfinance companies will suspend the establishment of new online microfinance companies and suspend the new batch of microfinance companies to carry out microfinance business across provinces (autonomous regions and municipalities). For borrowers, the evaluation of credit status, solvency and other loan qualifications should also be strengthened: various institutions are not allowed to issue loans to borrowers without income sources, and the total debt burden of principal and interest of a single loan should be clearly set at the upper limit.

The relevant person in charge of the central bank has publicly stated that all financial businesses, including cash loans, should be regulated. Zhou Xiaochuan, governor of the central bank, also stressed that the government will strengthen the licensed supervision of Internet finance.

in Guo Dagang's view, this notice embodies the above principles. He analyzed that the development of "cash loan" business has strong requirements for financial institutions' capital and technical capabilities, and licensed institutions have obvious advantages in this regard. At the same time, after the relevant institutions are connected to the credit information system of the People's Bank of China, their abilities of pre-lending and post-lending management and interest rate control are guaranteed.

In addition, with the strict qualification supervision, the rapid increase in the number of online small loan licenses since 216 may also "brake". According to the incomplete statistics of the Online Loan Home Research Center, as of November 22, 217, 213 online small loan licenses (including companies that have been approved by local financial offices) have been approved nationwide, and 189 of them have completed industrial and commercial registration.

Experts pointed out that under the background of the policy of suspending increment and compressing stock, it is expected that the institutions without relevant licenses will be cleared out one after another. Licensees will be more cautious about relevant cooperation, and business development will inevitably slow down.

Manage well rather than "manage to death"

It is undeniable that some enterprises and people in China still have a certain demand for short-term microfinance. For the "cash loan" business, how should the regulator manage it well, rather than "manage it to death"?

In Zhou Zhihan's view, the model of "helping loans" should return to its origin. He said that in the fierce market competition, some lending institutions have relaxed risk control links such as credit review in order to "flush the flow", which may bring two main effects. First, lax credit review and risk control have led to an increase in bad debts, resulting in the transmission and spread of risks to banks, trusts and other fund providers. The second is to let people who should not get loans get loans. These customers have low repayment ability, poor awareness of financial risks, and even malicious fraudulent loans. It may cause credit stain and economic loss to the borrower.

Guo Dagang believes that the supply of short-term microfinance services in the market is still relatively small, and qualified institutions should be encouraged to explore the market legally and legally. Therefore, it is necessary to establish an appropriate mechanism through standardization and rectification to correctly guide the market direction. At the same time, we should further clarify the market principle, "We should strike at the blow, not indulge it blindly, and avoid bad money driving out good money".

after the introduction of the new regulations, how relevant enterprises respond to this is the focus of market attention. Some companies that have been ahead of the industry have taken the lead in jumping out to show their attitude.

the fun shop group, which has attracted much attention, responded the first time on the night of the release of the new regulations, saying that the policies related to standardizing and rectifying the "cash loan" business issued by the state regulatory authorities are timely, efficient and powerful, which will definitely have a positive effect on the healthy and orderly development of the industry, and the fun shop group fully supports and resolutely implements them. However, the statement did not mention whether specific adjustments would be made to the business.

Perhaps, with the "hammer to the meat" rectification in place, the big reshuffle of the "cash loan" industry has just begun.