China's central bank and the CBRC issued a set of rules for the
burgeoning online lending market. My initial thoughts:
The rules seem harsher than I had expected.
It covers both P2P and online microcredit lending. There will be no
new online microcredit licenses but the existing ones are safe. P2P
platforms as a form of business are safe and viable.
It bans asset-backed securities (ABS) and sales of loan packages to
third parties via an asset exchange. That will hurt some online
lenders' funding source.
It may lead to a liquidity squeeze in the industry but P2P funding
seems permissible. But we should work harder to explore corporate
treasury as a new source of funding.
It could encourage more borrowers to default as the regulatory
crackdown and confusion continues.
The 36% cap on interest rates is going to hurt the industry at
large but some players are planning separate entities (with the
same shareholders) to do the data verification, servicing and
collection in order to comply with the new rule.
The banks and trust companies are likely to be more cautious in
dealing with the online lending industry.
Given the new political reality, it will be harder in the future
for the online lenders to continue to use trust structures or
entrusted loans to conduct business.