New support policies for finance companies

China Banking and Insurance Regulatory Commission has unveiled new policies to enhance the sustainable and high-quality development of consumer finance and auto finance companies.

The regulatory requirements for loan loss provision will be appropriately reduced, according to its notice. On the premise of their accurate classification of asset risks and true reflection of asset quality, consumer finance and auto finance firms can apply to the local watchdog to lower the provision coverage ratio to not less than 130 percent from the current 150 percent.

The loan loss reserve released by such a move shall be preferentially used for the write-off of non-performing loans, and shall not be used for the payment of salaries and dividends, the CBIRC said.

To broaden their financing channels, the regulator will support consumer finance and auto finance companies to transfer the income right of credit assets through the banking credit asset registration and circulation center, seeking to further improve the efficiency of their capital use, optimize their financing structure and reduce liquidity risk.

Additionally, qualified consumer credit and auto credit players will be allowed to issue bonds in the inter-bank bond market to replenish their capital.

These measures will give more flexible space for the development of consumer finance companies and reflect the determination of regulatory authorities to boost the sector, according to Mashang Consumer Finance.

They will also bring better market recognition of consumer finance, help better prevent and resolve risks and encourage consumer credit firms to better serve the real economy, the Chongqing-based firm said.