CBIRC published provisional rules on supervisory assessment of commercial banks’ financial services for micro and small enterprises (MSEs). CBIRC issued these rules to effectively use supervisory tools to guide commercial banks to comprehensively improve financial services for MSEs to alleviate their financing difficulties and lower the financing cost. CBIRC also issued provisional rules on supervisory rating of financial leasing companies. The rules consist of general provisions, rating factors and methods, operational procedures of rating, classified supervision, and supplementary provisions. The rules for MSEs and financial leasing companies shall come into force from the date of issuance. In addition, CBIRC, Ministry of Finance, and PBC jointly issued the notice on further improving the microfinance policies for poverty alleviation. The notice outlines six measures including a measure to further extend the repayment period of micro-credit loans, to the end of March 2021, for households affected by COVID-19 pandemic.
Provisional Rules on Supervisory Assessment of Commercial Banks’ Financial Services for MSEs
Regulatory authorities at all levels will guide commercial banks to take the initiative to use the requirements of the rules as benchmarks and conduct annual "in-depth check-up" on financial services for MSEs. The key points covered in the rules include the following:
- Clarifying assessment content and setting standardized indicators. The rules put forward assessment indicators that focus on credit services, cover the whole process of financial services for MSEs, and comprehensively assess the five aspects of the commercial banks' financial services for MSEs. These include MSE credit supply, institutional arrangements, implementation of key supervisory policies, innovation of products and services, and oversight and inspection.
- Determining the assessment mechanism and standardizing the assessment arrangements and process. The assessment will be conducted annually and is divided into self-assessment by banks, collection of information on supervision, preliminary supervisory assessment, supervisory review, notification of assessment results, and filing and other related work.
- Strengthening the application of assessment results and the role of supervisory assessment to provide incentives and guidance. The rules clarify the application of assessment results and emphasize coordination with relevant policy measures, to provide guidance for commercial banks to better serve MSEs.
Provisional Rules on Supervisory Rating of Financial Leasing Companies
The key highlights of the rules include the following:
- The rules set forth supervisory rating factors and methods. The supervisory rating factors of financial leasing companies mainly include capital management, management quality, risk management, and strategic management and professional capability, with respective weights of 15%, 25%, 35%, and 25%. The rules also put forward the corresponding downgrading clauses for special circumstances such as major criminal cases of financial leasing companies.
- The rules clarify operational procedures for supervisory rating. The supervisory rating of financial leasing companies comprises the following procedures: initial assessment by CBIRC local offices, review by CBIRC headquarters, feedback of supervisory rating results, recording, and archiving. In principle, the annual rating work should be completed before the end of May each year.
- The rules strengthen the application of supervisory rating results. The supervisory rating results of financial leasing companies are divided into five grades in seven levels: Grade 1, Grade 2 (A, B), Grade 3 (A, B), Grade 4, and Grade 5. Higher grades mean worse results, for which more supervisory attention is required. The supervisory rating results of financial leasing companies are an important basis for regulators to assess the company's operating conditions, risk status, and risk management capabilities as well as to formulate supervisory plans, allocate supervisory resources, and take supervisory measures and actions.
Related Links (in Chinese and English)
- Notification on Rules on Supervisory Assessment
- Rules on Supervisory Assessment
- Notification on Rules on Supervisory Rating of Financial Leasing Companies
- Rules on Supervisory Rating
- Notification on Improving the Microfinance Policies
Effective Date: Issuance Date
Keywords: Asia Pacific, China, Banking, COVID-19, SME, Governance, Financial Leasing, Supervisory Rating, Credit Risk, CBIRC, PBC
Leading economist; commercial real estate; performance forecasting, econometric infrastructure; data modeling; credit risk modeling; portfolio assessment; custom commercial real estate analysis; thought leader.
Previous ArticleBank of Italy Publishes XSD Schema for AnaCredit Reporting
PRA published the policy statement PS8/21, which contains the final supervisory statement SS3/21 on the PRA approach to supervision of the new and growing non-systemic banks in UK.
EBA published a report that sets out the final draft regulatory technical standards specifying the conditions according to which consolidation shall be carried out in line with Article 18 of the Capital Requirements Regulation (CRR).
EBA updated the list of other systemically important institutions (O-SIIs) in EU.
BCBS published two reports that discuss transmission channels of climate-related risks to the banking system and the measurement methodologies of climate-related financial risks.
UK Authorities (FCA and PRA) welcomed the findings of FSB peer review on the implementation of financial sector remuneration reforms in the UK.
PRA and FCA jointly issued a letter that highlights risks associated with the increasing volumes of deposits that are placed with banks and building societies via deposit aggregators and how to mitigate these risks.
MFSA announced that amendments to the Banking Act, Subsidiary Legislation, and Banking Rules will be issued in the coming months, to transpose the Capital Requirements Directive (CRD5) into the national regulatory framework.
EC finalized the Delegated Regulation 2021/598 that supplements the Capital Requirements Regulation (CRR or 575/2013) and lays out the regulatory technical standards for assigning risk-weights to specialized lending exposures.
OSFI launched a consultation to explore ways to enhance the OSFI assurance over capital, leverage, and liquidity returns for banks and insurers, given the increasing complexity arising from the evolving regulatory reporting framework due to IFRS 17 (Insurance Contracts) standard and Basel III reforms.
ECB published results of the benchmarking analysis of the recovery plan cycle for 2019.