China’s bank regulator issues rules to tighten oversight on car-finance firms, custody services within commercial banks
- Car-finance firms will have to exit the equity-investment business, but will be allowed to expand overseas and to finance add-on products like warranties
- The China Banking and Insurance Regulatory Commission on Thursday also outlined new rules controlling commercial banks’ custody services
China’s banking regulator is looking to strengthen its oversight of car-finance companies and the custody businesses of commercial banks with new rules revealed on Thursday.
The China Banking and Insurance Regulatory Commission (CBIRC) is soliciting opinions on both sets of draft regulations until January 29 next year. It did not specify when they will take effect.
Car-finance firms will no longer be allowed to run equity-investment businesses, which will force them to focus on their principal business, CBIRC said.
Financing for add-on products will be added to the companies’ business scope, however, and CBIRC will also allow car-finance companies to set up subsidiaries overseas to provide financial services to Chinese carmakers as they pursue their quest for global expansion.
CBRIC explained that current regulations, which have not been updated in 14 years, “no longer meet the needs” of the fast-growing industry. Use of financing is expected to increase from 43 per cent of vehicle purchases in 2019 to 61 per cent in 2025, according to consultancy firm Roland Berger.