Measures for the Supervision of Small Loan Companies in Shanghai

 2018-06-09  9


Notice of the General Office of the Shanghai Municipal People's Government on Issuing the Measures for the Supervision of Small Loan Companies in Shanghai Municipality

  • Document NumberNo. 42 [2016] of the General Office of the Shanghai Municipal People’s Government
  • Area of Law Banking & Finance
  • Level of Authority Local Regulatory Documents
  • Date issued09-23-2016
  • Effective Date10-01-2016
  • Status Effective
  • Issuing Authority People's Government of Shanghai Municipality



Notice of the General Office of the Shanghai Municipal People's Government on Issuing the Measures for the Supervision of Small Loan Companies in Shanghai Municipality
(No. 42 [2016] of the General Office of the Shanghai Municipal People's Government)
All people's governments of the districts and counties; and all commissions, offices, and bureaus of the Shanghai Municipal People's Government:
With the consent of the Shanghai Municipal People's Government, the Measures for the Supervision of Small Loan Companies in Shanghai Municipality is hereby issued for your diligent implementation.
General Office of the Shanghai Municipal People's Government
September 23, 2016
Measures for the Supervision of Small Loan Companies in Shanghai Municipality
For the purpose of implementing the spirit of relevant instructions of the CPC Shanghai Committee and the Shanghai municipal government, and further improving the financial services for “agriculture, rural areas and farmers,” scientific and technological innovation, and micro and small enterprises in this municipality, these Measures are developed, in accordance with the Guiding Opinions of China Banking Regulatory Commission and the People's Bank of China on the Pilot Program of Small Loan Companies (hereinafter referred to as the “Guiding Opinions,” No. 23 [2008], CBRC) and in light of the reality of the municipality.
I. Requirements for the pilot program
In accordance with the unified deployment of the CPC Shanghai Committee and the Shanghai municipal government, the pilot program of small loan companies shall be carried out. In combination with the scale, characteristics, and market demand of the regional economy, the number and layout structure of small loan companies shall be planned in a scientific and rational manner, and joint efforts shall be made for creating a market environment of fair competition and controllable risks.
The pilot program of small loan companies shall be implemented under the principles of “actively implementing the pilot program, promoting the pilot program in an orderly manner, establishing systems and developing rules, strictly controlling the access, specifying the duties and responsibilities, regulating the operation, effectively conducting supervision, and preventing risks,” to effectively provide financial services for “agriculture, rural areas and farmers,” scientific and technological innovation, and micro and small enterprises in this municipality.
II. Access qualifications and requirements for business operation
1. Access qualifications
“Small loan company” means a limited liability company or company limited by shares that is invested and formed by natural persons, enterprise legal persons, and other social organizations, that do not take deposit, and that provide small loan services. A small loan company whose main promoter is an enterprise legal person shall be registered and located in this municipality, be managed in a regulated manner with sound credit and strong power, have net assets not less than 100 million yuan and liability-asset ratio not higher than 70%, make profits for three consecutive years, and have total profits exceeding 30 million yuan.
The source of the registered capital of a small loan company shall be authentic and lawful, the capital shall be all paid in paid-in monetary capital on a lump-sum basis, and no one may make contribution with borrowed money or funds entrusted by other parties. During the period of the pilot program, the registered capital of a newly formed small loan company shall, in principle, not be less than 200 million yuan (the registered capital of a small loan company that mainly provides credit services for micro and small enterprises in the makerspace may be appropriately reduced to 100 million yuan). A small loan company that conducts business operation in a regulated manner, is well run, and needs to supplement capital shall be supported in increasing the registered capital and shares.
A small loan company shall have a reasonable equity structure. The aggregated percentage of shares held by a single main promoter and its affiliated parties shall not exceed 80%, general promoters without affiliation relationship with the main promoter shall not be less than 2, and the percentage of shares held by a single shareholder shall not be lower than 1%. The main promoter shall not transfer or pledge its equity within 3 years and other shareholders shall not transfer or pledge its equity within 1 year.
Small loan companies that are formed by large-scale internet service enterprises and mainly provide online small loan services, as well as that are formed by well-known domestic and foreign financial institutions (or financial holding groups) and introduce advanced technologies of small loans may be further supported in the shareholding percentage, enterprise name, and other respects. However, the supervision requirements for their loans in “small-sum and decentralized,” and other respects shall be accordingly enhanced.
To apply for serving as a director, supervisor, or senior management of a small loan company, a person shall have the financial knowledge and professional experience suitable for his or her performance of duties.
2. Requirements for business operation
(1) Source of funds
The capital source of a small loan company shall be the capital fund and donated funds paid up by shareholders, and funds raised from no more than 2 banking financial institutions. The balance of funds raised shall not exceed 50% of the net capital. A qualified small loan company may innovate on its financing methods under the relevant provisions of this municipality and expand the scale of loanable funds.
(2) Use of funds
The business scope of a small loan company is granting loans and providing relevant consultation. These activities shall be carried out in this municipality, in principle. A small loan company shall grant loans under the “small-sum and decentralized” principles, and shall be encouraged to provide credit services for “agriculture, rural areas and farmers,” scientific and technological innovation, and micro and small enterprises, and make joint efforts in increasing the number of clients and the service coverage. The balance of loans to a same borrower shall not exceed 5% of the net capital of a small loan company. A small loan company shall not grant loans to any shareholder or its affiliated parties.
A small loan company shall carry out business operation in a market-oriented manner and remove the ceiling on loan interest rate, but shall not exceed the ceiling prescribed by the judicial department. The specific floating range shall be determined independently under the market-oriented principle.
(3) Risk control
A small loan company shall establish a promoter commitment system. The shareholders shall sign letters of commitment with the small loan company, commit themselves to conscientious compliance with the bylaws of the company, participate in the management, and assume risks.
A small loan company shall, according to the requirements of the Company Law, improve the corporate governance structure, specify the relationship between powers and responsibilities among shareholders, directors, supervisors, and managers, develop moderate and effective rules of procedure, decision-making procedures, and internal audit rules, and improve the effectiveness of corporate governance.
A small loan company shall establish and improve the loan management system, specify the duties for pre-loan investigation, review during the process of granting loans, and post-loan examination, and prevent credit risks. A small loan company shall, under relevant provisions, establish a prudent and regulated asset classification system, improve the system for withdrawing loan loss reserves, and ensure that the adequacy ratio of asset loss reserves is always maintained above 100% and cover all the risks.
A small loan company shall strengthen internal control, establish and improve the accounting system for enterprises, and reflect the business and financial activities of the enterprise in an authentic and complete manner. It shall also establish an information disclosure system, disclose financial, business operation, financing, and other information of its shareholders, competent departments, banking financial institutions providing financing thereto, and relevant donation institutions on a regular basis, and disclose the information to the public if necessary. A banking financial institution that provides financing to a small loan company shall submit the financing information to the government of the district or county where the small loan company is located in a timely manner, and follow up and supervise the information on the use of financing of the small loan company.
A small loan company shall establish a business information system that meets the requirements and shall, in accordance with the relevant provisions and the supervision requirements of the competent departments of the municipality and district, connect it to the credit information system of the People's Bank of China, and effectively comply with the relevant provisions of the credit investigation system of the People's Bank of China on data submission and inquiry.
III. Working mechanism and approval procedures
1. Working mechanism
A promotion group for improving the work of the pilot program of small loan companies in the Shanghai Municipality (hereinafter referred to as the “Municipal Promotion Group”) shall be headed by the competent leaders-in-charge of the Municipal Government. The member entities shall include the Shanghai Financial Service Office, the Shanghai Head Office of the People's Bank of China, the Shanghai Office of the China Banking Regulatory Commission, the Shanghai Municipal Administration for Industry and Commerce, the Shanghai Municipal Agricultural Commission, the Shanghai Municipal Commission of Economy and Informatization, the Shanghai Municipal Finance Bureau, the Shanghai Municipal Bureau of Public Security, the Legislative Affairs Office of Shanghai Municipal People's Government, the Shanghai Municipal Commission of Commerce, the Shanghai Municipal Urban and Rural Construction and Transportation Commission, and the Shanghai Municipal Bureau of Local Taxation.
The major functions of the Municipal Promotion Group are: first, making overall arrangements for the pilot operation of small loan companies; second, examining and approving the districts implementing the pilot program of small loan companies; third, coordinating with the resolving of the problems encountered during the process of the pilot program of small loan companies; and fourth, directing the governments of districts and counties to effectively complete the work of supervision and administration, and risk handling of small loan companies.
Besides undertaking the routine work of the Municipal Promotion Group, the main functions of the Shanghai Financial Service Office, as the competent department for the pilot program of small loan companies, include: first, it shall be responsible for accepting the applications for the pilot program of the districts; second, it shall be responsible for the review of the applications for the pilot program of small loan companies, and other issues; third, it shall be responsible for the annual categorized evaluation of small loan companies; and fourth, it shall be responsible for urging the governments of districts and counties and relevant departments to effectively complete the work of routine supervision and administration, and risk handling of small loan companies.
The main functions of the government of districts and counties implementing the pilot program are: first. being responsible for singling out the subjects of the pilot program within their jurisdictions and conducting preliminary examination of the applications for the formation of small loan companies; second, conducting supervision and administration of small loan companies, and evaluating their services for “agriculture, rural areas and farmers,” scientific and technological innovation, and micro and small enterprises; and third, assuming the responsibilities of risk prevention and handling for the pilot program of small loan companies.
2. Approval procedures
(1) An application for and approval of a pilot program in a district
A government of a district or county that intends to implement the pilot program shall file an application for the pilot program to the Shanghai Financial Service Office. An application for the pilot program shall at least include the following contents:
(a) An introduction to the background. It shall include the information on the economy, finance, “agriculture, rural areas and farmers,” scientific and technological innovation, and micro and small enterprises in the region; and the necessity and feasibility for forming a small loan company.
(b) A work plan for the pilot program It shall include the organization and leadership of the pilot program and the specific department in charge of the application, preliminary examination, routine supervision, service evaluation, and risk handling of the pilot program of a small loan company; the basic information on the main promoter of a small loan company meeting relevant conditions and intending to file an application; the basic information on other promoters and shareholders; the steps and work arrangements of the pilot program; and other issues required to be explained.
(c) A commitment on risk handling. The responsibilities for territorial jurisdiction shall be implemented, routine supervision and regular inspection of the business operation of small loan companies shall be conducted, the unstable factors resulting from the business operation of small loan companies in violation of the regulations and laws shall be handled, and commitment to assumption of the liabilities for risk prevention and handling shall be made.
After being examined by the Shanghai Financial Service Office, an application of a district for the pilot program shall be submitted to the Municipal Promotion Group for examination and approval. The governments of districts and counties examined and approved by the Municipal Promotion Group to implement the pilot program shall single out the main promoters of local small loan companies that meet the relevant conditions and intend to file applications, and report them to the Municipal Promotion Group.
(2) An application for the pilot program of small loan companies and the approval thereof
A main promoter of a small loan company singled out by the government of a district or county implementing the pilot program shall submit the application materials for forming a small loan company to the government of the county in its locality, including:
(a) An application for forming a small loan company. It shall include the form of organization, planned name, planned registered capital, planned place of registration, scope of business, and other items of the small loan company.
(b) A plan for forming a company It shall include the steps and time schedule for forming the company; the registered capital, the roster of shareholders, and the amount and proportion of contribution of each shareholder; the draft bylaws and management rules of the company, including the business operation management rules, the financial management rules, the risk monitoring rules and the information disclosure rules; and the resumes of the planned senior management and photocopies of their identity certificates.
(c) Basic information on shareholders. The main promoter shall provide detailed information and relevant materials under the provisions. An enterprise legal person investor shall submit a photocopy of its business license and its audited financial statements, and meet the requirements for no criminal record and no bad credit record; a natural person investor shall provide a photocopy of his or her identity certificate, a resume, and a certificate on the source of funds for purchasing shares, and shall meet the requirements for full civil capacity, no criminal record and no bad credit record; and another social organization shall provide relevant evidential materials on its qualification.
(d) A letter of commitment. The shareholders shall commit themselves to voluntarily making contributions to a small loan company and ensuring that the source of funds is authentic and lawful; submitting authentic, accurate, and complete application materials; and consciously complying with the relevant provisions of the state, these Measures, and this municipality, and the bylaws of the company.
(e) A letter of legal advice. A letter of legal advice issued by a law firm shall include the information on the investors of a small loan company and the affiliation, the information on the formation of the company, and whether there are major violations of any law or regulation.
(f) A certificate on the ownership or use right of the place of business;
(g) A certificates issued by the public security department and the fire department, proving that the security and fire-fighting equipment in the place of business is qualified.
(h) A Notice on Pre-approval of Enterprise Name issued by the administrative department for industry and commerce.
(i) A capita verification report issued by a legally formed capital verification institution.
(j) Other materials required by the government.
Some of the aforesaid materials may be submitted after preliminary examination.
The government of a district or county shall, within 15 working days of the receipt of the application materials submitted by the main promoter of a small loan company, complete preliminary examination.
The government of a district or county implementing the pilot program shall submit the application materials for the formation of a small loan company passing the preliminary examination and the preliminary examination opinions to the Municipal Promotion Group. After the Municipal Promotion Group solicits the opinions of relevant member entities, the Shanghai Financial Service Office shall, within 15 working days, make a decision of approval or disapproval.
(3) Industrial and commercial registration
A small loan company applicant shall, upon strength of the approval document of the Shanghai Financial Service Office, undergo the formalities of registration with the administrative department for industry and commerce and obtain a business license according to the law. Moreover, it shall, within 5 working days, submit relevant materials to the local public security organ, the Shanghai Office of the China Banking Regulatory Commission, and the Shanghai Head Office of the People's Bank of China.
(4) Change and other issues
The formation of a branch of a small loan company in this municipality, and the change, termination, and other issues shall be governed, mutatis mutandis to, the provisions on the formation of a small loan company and other relevant provisions.
IV. Supervision and administration, and handling of problems
1. Supervision and administration
Except the Municipal Promotion Group, all member entities of the Municipal Promotion Group, and all governments of districts and counties implementing the pilot program respectively performing relevant duties, the governments of districts and counties shall specify the specific functional departments, implement continuous and dynamic supervision of the risk management, internal control, assets quality, adequacy ratio of assets loss reserves, affiliated transactions, compliance with the requirements of these Measures, the bylaws of small loan companies, and other respects of small loan companies, and take the lead in conducting on-site inspection; receive the financial, business operation, financing, and other information of small loan companies on a regular basis, and report to the Municipal Promotion Group in a timely manner; report the business operation and other basic information of small loan companies to the Municipal Promotion Group on a quarterly basis; and conduct comprehensive evaluation on the business performance, internal control, lawful business operation, and other respects of small loan companies on an annual basis, and submit the evaluation results to the Municipal Promotion Group.
2. Handling of risks
A small loan company shall accept social supervision and shall not illegally raise funds in any form.
A small loan company falling under one of the following circumstances during the process of business operation shall be ordered to make correction by the government of the county in its locality; where the circumstances are especially serious, it shall be given penalty by relevant departments according to the law; and where a crime is constituted, it shall be held criminally liable in accordance with the law.
(1) A small loan company is formed without approval.
(2) It is changed without approval.
(3) Its source or application of funds violate the relevant provisions.
(4) It refuses or hinders the inspection or supervision of the competent department.
(5) It fails to submit relevant information according to the provisions of these Measures.
(6) Other circumstances as prescribed by the government.
V. Support measures
The government of a district or county implementing the pilot program and the relevant departments of the municipal government may develop corresponding support measures for small loan companies.
The Shanghai Financial Service Office shall, in conjunction with the Shanghai Office of the China Banking Regulatory Commission, the Shanghai Head Office of the People's Bank of China, and other organizations, publicize the policies and provide training on the pilot program for the districts and counties, and small loan companies implementing the pilot program.
The Municipal Promotion Group shall give priority to recommending small loan companies that conduct business operation lawfully with sound credit to the banking regulatory departments and shall, under relevant provisions, transform them into village banks.
VI. Others.
1. Matters not covered by these Measures shall be governed by the Guiding Opinions and other provisions.
2. These Measures shall come into force on October 1, 2016 and be valid until September 30, 2021.