China yesterday issued new rules for auto financing companies,
which raise entry requirements and help expand their business
scope.
Auto financing companies will be able to issue bonds, borrow and
lend money on the interbank market, provide auto financial leasing
services and invest in stakes of companies which have businesses
related to auto financing, the China Banking Regulatory Commission
said yesterday in a statement on its website.
The regulator also imposed an industry-focus requirement on the
companies - the management of an auto financing firm should have at
least five years of experience in the industry or they have to hire
professionals.
For non-financial firms which want to enter the market, the
regulator doubled the requirement on value of assets to eight
billion yuan (US$1.11 billion) while the revenue requirement is
more than doubled to five billion yuan from two billion yuan.
They are also free to invest in more than one auto financing
company, which was banned under the former rules.
The profit condition has also been cut from "reporting profits
for three straight years" to "two straight years of profits."
The minimum regulatory capital adequacy ratio for these
companies will be cut from 10 percent to eight percent, the same as
for commercial banks.
"The growth of auto financial leasing companies is curbed by
limited financing channels and services under the previous rules
(and) that's why we revised the former rules," the banking
regulator said.
China issued its first rules and regulations on auto financial
leasing companies in October 2003.
At the end of 2007, eight firms have begun operations with total
assets worth 28.5 billion yuan. Their outstanding loans totaled
25.52 billion yuan. They have a combined profit of 16.47 million
yuan with a bad loan ratio of 0.26 percent. By contrast, major
Chinese banks' average bad loan ratio dropped to 6.7 percent at the
end of 2007.
(Shanghai Daily January 31, 2008)
