Update | China sets rules for online lenders as it vows to cleanse the market
Banking watchdog releases draft regulations to rein in booming sector of internet financing ‘middlemen’ that is becoming increasingly problematic
The mainland has taken its first concrete step towards reining in its boisterous online lending industry, which has grown increasingly problematic and threatens to endanger financial stability.
In draft rules issued this week, the China Banking Regulatory Commission defined such businesses as internet financing intermediaries that operate between borrowers and lenders, which means they cannot raise or lend funds on their own.
The commission acknowledged that an absence of risk controls and supervision, together with a shortage of rules, had allowed some firms to illegally raise funds and flee when the risks were exposed.
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The regulator said 2,612 peer-to-peer (P2P) online lending firms were operating normally by the end of last month, while more than 1,000 additional lenders were considered problematic, accounting for 30 per cent of the total.