Six ministries and commissions, including the China Banking Regulatory Commission and the National Development and Reform Commission, jointly issued the Administration of Finance Guarantee Companies Tentative Measures on 8 March.
The Measures were issued in order to strengthen the oversight of finance guarantee companies, regulate the provision of finance guarantees and address such issues as the marked relaxation in internal management in the finance guarantee business since the global financial crisis, inadequate risk identification and control capabilities, unlawful withdrawals of capital and illegal engagement in the finance guarantee business. Additionally, in this regard, the State Council has established an inter-ministerial committee for the oversight of the finance guarantee industry.
What are ‘finance guarantees’?
The Measures define the term “finance guarantee” as “the act whereby a guarantor agrees with a banking financial institution or other such creditor that in the event that the secured party fails to discharge its financial debt to the creditor, the guarantor will, in accordance with the law, assume the security liability specified in the contract”.
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