CBIRC Publishes Rules for MSEs and Financial Leasing Companies

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