Notice of the Guangzhou Municipal Local Financial Supervision and Administrationon the Issuance of Measures for the Management of the Inclusive Loan Risk Compensation Mechanism of Guangzhou
Sui Jin Rong Gui [2020] No. 1
To all parties concerned:
The Measures for the Management of the Inclusive Loan Risk Compensation Mechanism of Guangzhouhas been approved by the Guangzhou Municipal People’s Government and is hereby issued for your due implementation. Any problems encountered during the course of implementation should be reported to the Guangzhou Municipal Local Financial Supervision and Administration.
Guangzhou Municipal Local Financial Supervision and Administration
May 20, 2020
Measures for the Management of the Inclusive Loan Risk Compensation Mechanism of Guangzhou
Chapter I General Provisions
Article 1These Measures are enacted to implement the Plan for Advancing the Development of Inclusive Finance(2016-2020)(Guo Fa [2015] No. 74) issued by the State Council and pursuant to the requirements of the Several Measures of Guangzhou Municipality for Winning the Battle Against Covid-19 and Achieving Annual Economic and Social Development Goals(Sui Fu Gui [2020] No. 2) pertaining to establishing the Inclusive Loan Risk Compensation Mechanism of Guangzhou (hereinafter referred to as the “risk compensation mechanism”).
Article 2 In these Measures, “risk compensation mechanism” refers to the allocation of a dedicated budget of no more than CNY 200 million in the Guangzhou Special Financial Development Fund each year for use in encouraging collaborating banking institutions to strengthen support towards inclusive small and micro enterprise loans and provide a certain measure of compensation for principal losses caused by non-performing loans extended by them in the previous year that satisfy the stipulations of these Measures.
Article 3 In these Measures, “inclusive small and micro enterprise loans” refer to small and micro enterprise loans to a single borrower to whom no more than CNY 10 million in credit lines have been extended, and operation loans to individual industrial and commercial proprietors and owners of small or micro enterprises.
Article 4 In these Measures, “competent authority” refers to theGuangzhou Municipal Local Financial Supervision and Administration(hereinafter abbreviated as the Municipal Financial Supervision Bureau).
Article 5 In these Measures, “entrusted management agencies” refer to agencies entrusted by the competent authority to manage the routine operations of the risk compensation mechanism.
Article 6 In these Measures, “collaborating banking institutions” refer to those banking institutions voluntarily undertaking to abide by the provisions of these Measures that are publicly recruited and appointed based on merit by the competent authority.
Article 7 Budgeting and use of capital for the risk compensation mechanism shall abide by the principles of “inclusiveness, efficiency, autonomous application, targeted compensation, independent scrutiny, risk apportionment, and post-loss compensation”.
Chapter II Compensation Recipients, Requirements, and Standards
Article 8 Recipients of risk compensation are collaborating banking institutions.
Article 9 These Measures shall apply to borrowers who meet the following conditions concurrently:
(1) Borrowers should be small and micro enterprises, individual industrial and commercial proprietors, or owners of small and micro enterprises legally registered within the administrative division of Guangzhou. Small and micro enterprises shall be as defined by the relevant provisions ofNotice of the Ministry of Industry and Information Technology, the National Bureau of Statistics, the National Development and Reform Commission, and the Ministry of Finance Regarding the Issuance of Regulations for the Classification Standards for Small and Medium Enterprises(Gong Xin Bu Lian Qi Ye [2011] No. 300); individual industrial and commercial proprietors shall be as defined by the Regulations on Individual Industrial and Commercial Proprietors(Guo Ling No. 596). In addition, borrowers should not fall within the scope of “restricted” or “phasing-out” industries, nor should they be from the financial, “quasi-financial” or real estate sectors. “Restricted” and “phasing-out” industries shall be as defined by the Guiding Catalogue for Industry Restructuring (2019 Edition)issued by the National Development and Reform Commission.
(2) Borrowers should not be high-tech small and medium enterprises supported by theMeasures for the Management of Credit Risk Loss Compensation Fund Pools for High-Tech Small and Medium Enterprises in Guangzhou (Sui Ke Gui Zi [2019] No. 4) at the time of receiving loans from collaborating banking institutions.
Article 10 A loan applying for fund compensation must, at the same time, satisfy the following requirements:
(1) The loan meets the requirements of Article 3 of these Measures regarding inclusive loans to small and micro enterprises;
(2) The loan agreement explicitly states that the loan is unsecured, whether by mortgage or pledge (for the purpose of these Measures, loans backed by intellectual property pledges or accounts receivable are deemed to be unsecured), and not guaranteed by a third party. In addition, the loan credit extended may not exceed CNY 10 million.
(3) Within the same year, if two or more collaborating banking institutions extend loans to the same borrower (for the purpose of these Measures, a small or micro enterprise and its owner are deemed to be the same borrower), or if a collaborating institution extends multiple loans to the same borrower, these loans shall be aggregated in chronological order by their date of issuance. Loans to the same borrower within the same year that may be included in the loan total, as relevant to these Measures, may not exceed CNY 10 million.
(4) The loan must be used for business operations, not entrusted loans, merger & acquisition loans, private loans, or loans for investments in capital markets.
(5) The loan must have never enjoyed the benefits of other municipal loan risk compensation policies issued by Guangzhou.
Article 11 A non-performing loan applying for fund compensation must, at the same time, satisfy the following requirements:
(1) Such non-performing loan, as defined by relevant provisions of the China Banking and Insurance Regulatory Commission, should have been issued after the promulgation of these Measures.
(2) Litigation (including notarization that constitutes enforcement), arbitration, and other relevant measures to recover the loan, in accordance with the law, should have been initiated by the relevant collaborating banking institution. In addition, the relevant statutory arbitration institution should have been unable to recover all or part of the loan although it has already issued a valid legal document or more than 30 days have passed since the filing of the case.
Article 12 Amounts and standards for applications to receive compensation.
(1) The total compensation each year shall not exceed CNY 200 million.
(2) Methods for calculating compensation standards and ratios: Where the total amount of principal losses from non-performing loans eligible for compensation does not exceed CNY 400 million, 50% of the principal loss for each non-performing loan shall be compensated; where the total amount exceeds CNY 400 million, the compensation ratio for the principal loss of each non-performing loan shall be the ratio of CNY 200 million to the total (accurate to the second decimal place for percentage points).
Chapter IIIManagement Responsibilities and Division of Duties
Article 13 The duties of the competent authority are as follows:
(1) Overseeing and managing the operation of the risk compensation mechanism and lead the formulation of relevant detailed rules for implementation.
(2) Applying for the allocation of annual budgets from municipal fiscal funds for risk compensation, and disbursing compensations as per relevant procedures.
(3) Selecting collaborating banking institutions in conjunction with the Guangzhou branches of state financial regulatory authorities and evaluating the management of collaborating banking institutions. Relevant measures shall be separately formulated.
(4) Selecting entrusted management agencies and evaluating the management of such agencies. Relevant measures shall be separately formulated.
(5) Further reviewing applications by collaborating banking institutions for compensation with respect to non-performing loans submitted by entrusted management agencies (hereinafter referred to as “compensation application documents”), determining the list of non-performing loans to be compensated, as well as supervising and guiding collaborating banking institutions in timely and duly disposal of non-performing loans to ensure that the use of compensations complies with relevant laws and regulations.
Article 14 The duties of entrusted management agencies are as follows:
(1) Aggregating loan data submitted by collaborating banking institutions that meet the requirements of Article 10 of these Measures, and establishing relevant records.
(2) Taking charge of acceptance and aggregation of compensation application documents, and establishing relevant records.
(3) Conducting preliminary review of compensation application documents, and establishing relevant records.
(4) Aggregating non-performing loans that have been identified by the competent authority, establishing relevant records, and, based on these records, urging collaborating banking institutions to promptly recover all monies due from reported non-performing loans before disbursing compensations.