China’s ‘Big Four’ banks still keeping a safe distance from burgeoning peer-to-peer lending sector
By next August all P2P platforms must have a custodian bank. So far, just 74 out of the total 2,534 in operation have done so.
China’s major banks are seemingly taking a “wait-and-see” approach to being future custodians for the nation’s growing number of peer-to-peer (P2P) lending firms, whose reputation has been hit hard by a series of high-profile fraud cases.
P2P lending platforms act as intermediaries that connect people with small sums of spare cash to people in need of small loans. As unlicensed, non-financial firms, they cannot sell investment products, collect deposits or pool the funds they take in.
A custodian is a financial institution that holds customers’ securities for safekeeping to minimise the risk of their theft or loss. Securities and other assets can be held in electronic or physical form and since the custodians are responsible for the safety of assets and securities that may be worth billions of yuan, they generally tend to be large and reputable firms.
By law, all P2P platforms now need to have the backing of a registered bank by August 2017, after being given effectively a 12-month grace period to meet the mandatory requirement.
Outstanding credit in the P2P industry stood at 800 billion yuan by the end of November, according to data from wdzj.com, a website tracking the industry, giving an illustration of the scale of the capital needing to be put under custody.
