China Banking Regulatory Commission (CBRC), on 5 January 2018, issued the Administration Measures on the Entrustment Loans of Commercial Banks (the Measures), which came into effect on the same date. The Measures streamlined and tightened the regulations over entrustment lending in China.
An entrustment loan refers to a loan between corporates (and/or individuals) as lender and borrower, and a Chinese commercial bank acts as the intermediate agent (the agent bank) of the borrower and lender for the payment and administration of the loan. The agent bank does not provide funding for the loan or assume any risk in relation to the loan. The Measures apply to all entrustment loans in China, other than those “entrusted fund flows” under the cash pooling products offered by Chinese banks.
We set out below the highlights of the Measures for your reference:
Restrictions on the source of funds. Asset management companies and other non-bank institutions licensed to engage in lending business are not permitted to extend entrustment loans.
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Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Danian Zhang (Shanghai) at email@example.com