Circular of China Banking Regulatory Commission

Competent departments, CBRC local bureaus, policy banks, state-owned commercial banks, joint-stock commercial banks, asset management companies, postal savings banks, and trust companies, financial companies and financial leasing companies under direct CBRC supervision,

In the spirits of the important instructions and replies from the leading comrades of CPC Central Committee and State Council on promoting and improving financial services to small-sized enterprises and the requirement of economic work in the second half this year, aiming at solving the operation difficulties of the small-sized enterprises and easing their financing problems, all the banking financial institutions should follow the requirements of scientific outlook on development to carry out reform and innovation, to seek truth and pragmatism, to fulfill their responsibilities and to achieve a breakthrough, further improving financial services to small-sized enterprises and increasing credit support to them. The relevant requirements are hereby notified as follows:

I. To make sure that the new credit line is maximally used in supporting the development of small-sized enterprises. The banking financial institutions should seriously implement the neutrally balanced principle of taking different approaches to different situations and encouraging the growth of some sectors while discouraging the expansion of others, strengthen consciousness and initiative, increase the strength of credit structural adjustment, improve the allocation structure of asset maturity and adhere to the combination of total fine-tuning and structure optimizing, to ensure that the total increased credit is used for improving the credit structure and truly increasing the credit input for small-sized enterprises. First, the credit line and the examination method of small-sized enterprises should be separated from others. The institutions should follow the principle that the increased lending rate of small-sized enterprises is not lower than the overall loan incremental rate and the incremental volume is not less than that of the previous year; the new credit line of small-sized enterprises is arranged and assessed independently. Strengthen the restructuring of assets stock; after being reclaimed, the loan should be put into priority fields and weak links of economy to optimize the credit structure of stock. Second, the client list should be separately listed, managed and counted. Grasp the focus, rhythm and intensity of macroeconomic control; according to domestic policies on industry and environment, take the small-sized enterprises with good market, excellent technology and promising prospect as the key supporting target, and make the list of small enterprise customers that the branch institutions support, provided for the manager on marketing or credit approval. Third, the price should be made independently and float reasonably. Support should be given to the sustainable development of small-sized enterprises at the time preventing the risk and social responsibility should be performed when improving the efficiency and the lending rate of small-sized enterprises shall float on the basis of risk pricing. No insurance, funds and other products may be sold when granting loans, no unreasonable loan conditions may be attached and unreasonable fees may not be charged.

II. To further enhance the financial service functions of small-sized enterprises. The banking financial institutions should integrate their own reality and choose a suitable operation method and organizational structure to implement ��the six mechanisms�� and fulfill the sustainable development in commercial credit of small-sized enterprises. The large and medium-sized banks should enhance the service consciousness, and according to the ��short, small, frequent and urgent�� characteristics of small-sized enterprises financing, rebuild the organizational structure and procedure, promote the multi-divisional structure of small-sized enterprises credit system, and grasp the building of long-term mechanism. Establish the specialized credit management and professional teams of small-sized enterprises, as well as the system and method of classified management, separate accounting and independent assessment, to establish the credit approval, risk management and incentive mechanisms, personnel training and internal control systems which are suitable for credit characteristics of small-sized enterprises. The local banking institutions should play full functional advantages to service small-sized enterprises, combined with its own characteristics to focus on the county and community financial services; on condition of meeting the prudential requirements and ensuring the sound operation, they could make full use of the new credit resource to increase the credit support to local small-sized enterprises. The banking financial institutions could increase outlets institutions appropriately in areas where private economy is relatively active, private capital is rich and the financial demand is large; in accordance with the principle of ��low threshold and strict supervision��, they could appropriately expand the new experimental scale of rural banks and other financial institutions to speed up the process of examination and approval. At the same time, it is necessary to further regulate and facilitate private lending activities.

III. To strongly promote the financial innovation. First, innovate guarantee method for small business to mortgage loan and to explore new guarantee method in the law permitting extent, such as mortgage of rights and cash flow, including mortgage loan of inventory, transferable forest ownership, land contract right, intellectual property rights, accounts receivable and promote equity. Second, develop trust financing, lease financing, bond financing and financial products based on trust and lease under the premise of strengthening supervision and controlling risk; gradually promote credit asset securitization business of small-sized enterprises on the basis of standardizing the management. Third, develop and innovate trade financing instruments of small-sized enterprises, especially expand trade financing under the terms of letters of credit, explore trade financing out of the terms of letters of credit, and use the general accounts receivable to support small-sized enterprises, including a series of integrated financial services such as developing financing of accounts receivable, providing financing funds, debt reclaiming, sales account management, credit sales control and bad debt guarantee; encourage financing of warehouse receipt pledge and goods right pledge, expanding financing in supply chain. Four, strengthen interaction with insurance companies to combine financing of banks with credit insurance of insurance companies in a close tie. The banks provide trade financing for enterprises by transaction documents, insurance policies and claim payment transfer. Use the high risk-sharing capacity of insurance company to expand the capacity of small-sized enterprises in financing. Five, effectively combine the credit products, capital settlement, financial management products, electronic bank products with trade financing products to carry out marketing bindingly, providing overall financial services for small-sized enterprises. At the same time, strengthen financial advisory and consultant services, provide financial management services for small-sized enterprises, and help small-sized enterprises operate regularly, effectively prevent various economic and financial frauds and ensure the security of fund.

IV. To scientifically assess and in time dispose of bad loans of small-sized enterprises. Banking financial institutions should adhere to risk coverage and sustainable principle to reduce moral hazard in the course of financial transactions. According to their own characteristics and needs in credit management and risk prevention, loans of small-sized enterprises are classified by advanced technology and accurate method. Establish the control indicators and ratios of bad loans reasonably on the basis of the scientific calculations, separately assessing the bad loans of small-sized enterprises. According to the new management method of canceling bad debts after verification for financing enterprises, cancel the loan losses of small-sized enterprises in time in accordance with the law.

V. To comprehensively play the promotional role of supporting policies. Banking financial institutions should fully use the good opportunity in adjustment of financial and taxation policies, strengthen the credit support to small-sized enterprises, and actively assist export enterprises to do the capital settlement work., play a comprehensive role in direct financing, indirect financing, risk compensation and support in finance & taxation, expand financing channels to adapt to different financing needs of various small-sized enterprises in different industries, different performance, different levels of profitability, reduce their dependence on credit market. Regulatory departments and banks should coordinate relevant departments initiatively to accelerate the construction of credit system, explore the financing mode supported by credit construction, and improve the financing environment of small-sized enterprises. They shall speed up in building the credit collection system, rating release system, default information noticing mechanism and dishonesty punishment mechanism that fit the small-sized enterprises, study and formulate credit management system for small-sized enterprises, and provide a platform for effective information sharing and communication.

VI. To effectively change the working method and do practical things for financing of small-sized enterprises. All the departments and banking financial institutions should change the simple and blundering working method. The leaders should take the lead to do in-depth investigations and studies into small-sized enterprises, come close to business, customers and market; it is necessary to do solid work, especially practical things, for meeting the urgent needs of small-sized enterprises. A group of outstanding small-sized enterprises should be cultivated according to the developing strategies and market orientations of banks as the future customers with high loyal quality. The responsible persons of units and institutions must go out of offices and conference rooms to enter the enterprises, carry out research, find new situations and new problems, listen to the views of the public, and discuss solutions with them face-to-face, win good image of banks on the basis of sincere services, vivid emotions and practical supports, win returns of the society and trust of the public through portraying a good image of banks, and more responsibility should be taken for socio-economic development and greater contributions should be made in the future.

The banking financial institutions should put forward concrete measures of work according to the practical situation, carefully implement the Circular, and submit the implementation report to CBRC before September 20. Local corporate bodies should report the status of implementation to local CBRC offices.

China Banking Regulatory Commission

August 29, 2008

  China Banking Regulatory Commission 2008-08-29