Author: Xue Hongyan

On December 1, the Office of the leading Group for the Special rectification of Internet Financial risks and P2P Network loan risks officially issued the notice on standardizing and rectifying the "cash loan" business (hereinafter referred to as the "notice"). The boots that made the industry anxious finally landed.

On the whole, the content of the notice is more stringent than the market had expected. first, the definition of cash loan is broader. The consumer loan business of "no scene support, no designated use, no customer group restriction, no mortgage" is within the scope of this rectification. The second is to strengthen the 36% policy red line, the industry expected that the policy level for the differential treatment of petty cash loans failed, and clearly required that the platform should show an annualized comprehensive cost of capital; third, a clear request to suspend the issuance of online micro-loans in line with the characteristics of cash loans, which was not expected by the market before. Other aspects such as licensing requirements, capital source regulation, leverage ratio regulation, loan assistance supervision and so on are basically in line with market expectations.

In addition, the business carried out by P2P in line with the characteristics of cash loans is also included in this rectification, which means that after the transformation of small bids on P2P platforms, the cash loan business with high interest rates will also be restricted and the industry space will be further compressed.

On the whole, the tuyere of cash lending has come to an end, and those platforms that have stuck to the stage of the scene and the low interest rate model will have a greater advantage in the differentiation of the industry.

Next, let's briefly interpret it.

The severity exceeds the market expectation.

1. "Cash loan" is defined for the first time, and its scope exceeds market expectations.

There has been a lot of controversy about cash loan these days, but embarrassingly, there is no authoritative determination of the concept of "cash loan" in the market, and the debate is based on their own understanding. However, most people (including the author) divide cash loans into two categories: broad sense and narrow sense. Taking the author as an example, in the article "when wind and rain are about to come, let's look at the rise and fall of cash loans", the definition is as follows:

"in a broad sense, personal loan products that are not based on specific consumption scenarios and entrusted payments can be regarded as cash loans. Practitioners include banks, consumer finance companies and other licensed institutions. It also includes Internet consumer finance platforms, P2P loans, cash loan platforms and other non-licensed institutions, with high and low interest rate pricing, large and small amounts, and long and short term. In a narrow sense, the current controversial cash loan products mainly refer to specific products with short term, small amount and high interest rate, and the operators are mainly non-licensed institutions, which are the initiators of the potential risks in the industry. "

The "notice" defines the cash loan as "no scene support, no designated use, no customer group limitation, no mortgage and other characteristics", which is basically a broad sense of cash loan, and the scope of jurisdiction exceeds market expectations.

2. Strengthen the red line of 36% policy, and the expectation of stratified differential treatment has failed.

For typical cash loan products with small amounts and short maturities, under the current industry average default rate, the annualized interest rate below 36% is bound to die. Therefore, a regulatory version has been circulated in the early market, that is, the policy level will be treated differently for different cash loan products, not across the board.

In other words, cash loan products with an amount of less than 3000 yuan (2000 yuan) may be given some room in the interest rate. Judging from the content of the notice, this expectation has been disappointed.

3. Suspend the issuance of network micro-loans without specific scenarios and without designated purposes.

The general expectation in the market was that loans with an annualized interest rate of more than 36% could no longer be made and could only be used for interest rate compliance. However, the "notice" requires "to suspend the issuance of network micro-loans without specific scenarios and without designated purposes, gradually reduce the stock business, and complete the rectification within a time limit," which means that during the rectification and reform period, the cash loan business that the interest rate meets the requirements cannot be done, and it is undoubtedly a blow to the platform that focuses on the cash loan business.

The areas with high incidence of problems do not fall.

More stringent than the market expectations at the same time, the market generally expected regulatory measures is a lot, such as sources of funds, leverage, loans and other problem-prone areas, are the focus of this rectification.

1. Standardize the behavior of loan aid

To some extent, the rise of the loan aid model is one of the root causes of chaos in the cash loan field, so it is not surprising for the notice to operate on the loan model. In terms of specific regulatory requirements, it is basically consistent with previous market expectations, and the loan model is roughly divided into four links: capital cooperation, marketing acquisition, risk-taking and risk data. among them, financial cooperation, risk-taking and other lending models involving substantive lending with non-licensed institutions have been stopped, but the cooperation in marketing customer acquisition and risk data is still feasible.

The notice clearly requires

"Banking financial institutions shall not provide funds and loans to institutions that do not have the qualification for lending business in any form, or jointly contribute funds and loans with institutions that do not have the qualification for lending business"

At the same time, it also stopped the loan aid model of "risk-taking" and clearly stipulated

"the 'loan' business should return to its origin, and banking financial institutions shall not accept credit enhancement services provided by unsecured third-party institutions and disguised credit enhancement services such as underwriting promises." it shall be required and guaranteed that third-party cooperative institutions shall not charge interest fees from borrowers.

2. Supervision of sources of funds

In addition to standardizing the mode of "financial cooperation" in the process of lending, the notice also explicitly prohibits small loan companies from selling or transferring credit assets through Internet platforms or local exchanges, and forbids the integration of funds through online lending information intermediaries. On the one hand, it not only stops the over-the-counter ABS model of consumer finance, but also cuts off the financial cooperation between small loan companies and P2P platforms.

To some extent, the funding sources of small loan companies have returned to the original point. The guidance on the pilot of small loan companies issued by the CBRC in 2008 clearly pointed out that

The main sources of funding for microfinance companies are capital paid by shareholders, donated funds, and integrated funds from no more than two banking financial institutions.

As for whether some of the deregulation policies in various localities continue to be effective, it also depends on the detailed rules of rectification and reform in the follow-up localities. For example, Shanghai stipulates that "qualified micro-loan companies can innovate financing methods and expand the scale of loanable funds in accordance with the relevant regulations of this city." including financing from banking financial institutions, issuance of private bonds, fund transfer and lending among micro-loan companies in this city, asset transfer, securitization of credit assets, etc., the leverage of integrated funds can also be relaxed to 100%.

3. Strengthen the supervision of leverage ratio

Leverage is a core issue, and as unlicensed institutions, cash lending platforms are not regulated by leverage. In this case, 1 billion of the capital can even put tens of billions of loans, which means that the platform mainly depends on the interest income in the course of operation to bear the risk. Once a local systemic event occurs, the bad rate rises sharply and breaks through the pricing of the loan interest rate. At that time, the platform does not have sufficient capital to hedge the risk. Only when it fails, the risk will be transmitted to the capital side. From this point of view, many of the seemingly spectacular cash loan platforms do not have the ability to withstand local systemic risks, with a large scale and a weak foundation, which makes people have to worry.

So it is not surprising to strengthen leverage regulation. The notice clearly requires

"the funds incorporated in the name of credit asset transfer and asset securitization shall be combined with on-balance sheet financing, and the ratio of total financing to net capital after the merger shall be temporarily implemented in accordance with the current local regulations. All localities shall not further relax or relax in a disguised form the provisions on the proportion of funds incorporated into small loan companies.

What is the current ratio? The guidance on the pilot of Micro-loan companies issued by the CBRC in 2008 requires that "within the scope of laws and regulations, the balance of integrated funds obtained by micro-loan companies from banking financial institutions shall not exceed 50% of the net capital." of course, various localities have varying degrees of relaxation on this basis.

Some new expressions worthy of attention

In addition to the above provisions related to problem rectification and reform, for cash loans, there are some new references or requirements in the notice, which are worthy of attention.

1. Make it clear that loans shall not be granted to borrowers with no source of income.

Compared with banning campus loans from non-licensees, the explicit ban on loans to borrowers with no source of income has been further expanded, meaning that students and other groups who are unable to repay are prohibited.

2. The total debt burden of principal and interest fee for a single loan should be clearly capped.

This formulation is mainly aimed at the phenomenon of long lending, but in the specific landing, it also depends on the establishment of information sharing mechanism. It is the same reason as the new P2P regulation requires individual borrowers to borrow no more than 1 million yuan on multiple platforms.

3. It is clearly put forward that the "data-driven" risk control model should be used cautiously.

For the unsecured cash loan business, the "data-driven" risk control model is almost the only means of risk control. The notice suggests that big data's risk control model should be used cautiously, which, to some extent, should be a concern about the homogenization of risk control models in the industry. Many small cash loan platforms do not have the modeling ability of big data, and mostly rely on access to third-party data services for risk control. The result is the homogenization of the risk control model, which is good in good times and bad in bad times, which is not a good thing.

Many times, slow is fast.

Consistent with the previous P2P industry rectification, cash loan consolidation has also given a certain transition period. The "Circular" clearly requires that "all localities should strengthen organizational leadership and overall coordination, take the lead of local financial regulatory departments, clarify the principal responsible departments of various institutions, find out the risk base, and formulate rectification plans." for the industry, there is an opportunity for respite and transformation.

However, since there is a requirement to "suspend the issuance of network micro-loans without specific scenario support and no designated purpose", the transformation of the platform can only be carried out in stages to the scene. It is not difficult to predict that in the short term, as many cash loan platforms seek to "hug their thighs", the "value" of the scene side will soar, but, compared with cash loans, scene staging is another model, and most cash loan platforms may encounter problems of disobedience.

Are there any beneficiaries of this industry rectification? Yes, that is the platform for compliance and licensed operation all the time. It was only at this time that we found that, in many cases, slow is fast.

(from the official account of Wechat: Hongyan Weiyu)