6 March 2017
CBRC Issues Guidelines for Online Lending Fund Depository Business
The China Banking Regulatory Commission (CBRC) recently issued the Guidelines for Online Lending Fund Depository Business (see Guidelines in Chinese), which clearly stipulate that online lending institutions may not engage in marketing publicity as depositaries unless it is for necessary disclosure and regulatory requirement. Commercial banks, as depositaries, do not have to provide guarantees for online lending or bear responsibility for defaults. Commercial banks are also prohibited from conducting bundle sales or charging unreasonable fees in a disguised manner on the excuse of arranging fund depository business.
As part of the internet finance rectification exercise, the rectification of online lending risks in fund depository business remains a thorny issue not properly addressed. According to figures released by a third-party organisation, up to the end of 2016, 32 commercial banks had arranged online lending fund depository business, over 180 online lending institutions had signed depository agreements with banks, and over 90 institutions were in the process of connecting their systems with banks, accounting for 4% of all online lending institutions.
As an important supporting system for the implementation of the Interim Measures for the Administration of the Business Activities of Online Lending Information Intermediaries, the Guidelines form a relatively complete system of regulatory policies to facilitate the deepening of rectification during the transitional period and prepare the standard and basis for specific rectification tasks.
On the basis of the requirements necessary for principals and depositaries to engage in online lending fund depository business, the Guidelines specify that online lending institutions, as principals, shall comply with the relevant provisions of the Interim Measures and the Guidelines for the Administration of Record-Filing and Registration of Online Lending Information Intermediaries. Meanwhile, as depositaries, commercial banks should meet the basic requirements for the department in charge and in terms of technical regime, business system and payment and settlement.
Based on the existing legal relationship between depositaries and principals, the Guidelines draw lesson from the experience and existing practice of the third-party depository business of securities funds in the setting up of accounts. In other words, the principal is required to open a special online lending fund depository account at the depositary. It must also open sub-accounts for its clients (including lenders, borrowers and other parties to online lending business) to ensure the separate management of self-owned funds and clients’ funds and safeguard clients’ transaction settlement funds.
In line with the principle of “separating the new from the old”, the Guidelines allow a six-month grace period for institutions that have already started online lending fund depository business to give these institutions time for file recording, registration and systems transformation and to keep in step with the transitional period for rectification specified in the Interim Measures.