China to tighten online lending rules from 2022 in additional measures to rein in fintech giants, pre-empt banking crisis

China’s banking industry regulator has tightened requirements on online lending by commercial banks and internet platforms from next year in a move to foster a steady pace of growth and pre-empt any financial crisis, analysts said.

The new rules will require all online lending platforms to contribute 30 per cent of the funding for loans they offer in partnership with traditional banks from January 1, 2022, the China Banking and Insurance Regulatory Commission (CBIRC) said in a statement on its website on Saturday.

The 30 per cent rule, first mentioned in a consultation paper in November, means platforms operated by the likes Ant Group, JD Digits and Lufax, will need to put up more of their own capital to make new loans. Currently, they contribute about 20 to 40 yuan for every 1,000 yuan (US$154.50) of loans, while commercial banks assume most of the credit risks.

The tightening came as fintech giants expanded their reach to a billion online users and teamed up with banking partners, stoking concerns about systemic risks. They lent US$516 billion in 2019, a 42 per cent increase over 2018, according to China‘s central bank.