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    Officials from the Inter-Agency Taskforce on the Supervision of Credit Guarantee Activities in Press Conference

    1. Q: What major achievements have been reached in credit guarantee activities recently?


    A: Firstly, credit guarantee companies have witnessed strengthened capability and rapid business growth. As of end-2010, China’s credit guarantee institutions numbered 6,030, and paid-in capital reached RMB 450.6 billion, up by RMB 100 billion form a year earlier. Average registered capital was RMB 75 million, with 29 institutions’ registered capital over RMB 1 billion (1 billion included), and 1,863 institutions standing between RMB 100 million and to 1 billion. Nearly 80% of credit guarantee companies hold registered capital more than RMB 20 million. The total asset volume and net asset of the industry was RMB 592.3 billion and RMB 479.8 billion respectively. The balance of guarantee totaled RMB 1.15 trillion, a Y-O-Y increase of 64.6%, of which credit guarantee covered 86.5%, numbering RMB 994.8 billion, and loan guarantee took up 79.5%, numbering RMB 913.9 billion.

    Secondly, credit guarantee institutions’ operation and management have been standardized, helping to improve their risk controls stability. Following the release of Provisional Rules Governing Credit Guarantee Companies (hereinafter referred to as the Rules) along with eight supporting regulations, especially after the overhaul of the industry, credit guarantee companies had corrected their business activities, put more emphasis on prudential operation, and strengthened the building of legal compliance. In 2010, the compensatory rate was 0.7%, loss rate 0.04%, provision ratio (balance of guarantee provision/balance of guarantee) 3.1%, provisioning coverage ratio (balance of guarantee provision/balance of compensation) 507.3%.

    Thirdly, cooperation between banks and credit guarantee companies became closer. Credit guarantee for small and medium-sized enterprises (SMEs) has expanded by a large margin. At the end of 2010, 10,321 banking institutions, including branches and sub-branches, have built up business relationship with credit guarantee companies, a Y-O-Y increase of 27.1%. The credit guarantee balance totalled RMB 893.1 billion, excluding loans extended by small loan companies, up by 60.9%. The number of clients has reached 166,000, up by 48.9%. Credit extended to SMEs has amounted to RMB 689.4 billion, accounting for 77.2% of the total credit guarantee, up by 69.9%.  Credit guarantee companies have played a full role in providing credit guarantees for SMEs. Loans have provided credit guarantee to 142,000 SMEs, which accounts for 85.5% of the total clients, up by 58.3% , having played an active role in underpinning the funding of SMEs.

    2. Q: What major supervisory measures have been taken lately and what is the market reaction?

    A: First, in institutional building, the framework of orderly development and prudential supervision for the industry has taken shape. The inter-agency meeting on the supervision of credit guarantee activities (hereinafter referred to as the Inter-agency meeting) formulated Provisional Rules Governing Credit Guarantee Companies, and eight supporting rules, which covered the qualifications for senior executives, corporate governance, internal controls, information disclosure, license management, major risk events reporting, and industrial statistics, etc, and the operating rules, regulatory criteria, and basis requirements of supervision for credit guarantee activities. The fundamental framework for standardizing credit guarantee activities has taken shape, which has laid solid institutional foundation for the credit guarantee companies to enhance their internal controls and risk management, as well as for the supervisory authorities to conduct effective supervision.

    Second, the supervisory system on credit guarantee activities has been preliminarily established, taking the supervisory work on a regular track. In response to Notice of the General Office of the State Council on Further Specifying the Supervisory Mandates for Credit Guarantee Business (State Council Document No. (2009) 7), governments of all provinces and municipalities made clear the duties and obligations of each supervisory department in a timely fashion and worked out detailed methods for the implementation of the Rules. Recently, with the market access, daily monitoring, and exit mechanism gradually coming into being, the supervisory work for credit guarantee activities has been getting on a sound track. The inter-agency meeting also made in-depth research on the issues related to the development of the credit guarantee sector, motivated relevant departments and local governments to issue policies and measures, and supported the sound development of this sector.

    Third, there has been an overhaul in the industry. After the issuance of the Rules last year, the inter-agency meeting immediately carried out an overhaul over the whole financial sector. The local governments conducted overall investigation, risk inspection, qualification examination, and re-registration and approval. This task was accomplished at the end of March this year, and the Business Licenses were issued to the qualified credit guarantee companies.

    Through a series of measures, the image of credit guarantee companies and market confidence have been uplifted. Credit guarantee companies across China are more willing to increase their capital and shares. The increment in capital funds has been considerable, supported by continuous state-owned, private-owned and foreign investments, which helped enhance the standardization and robustness of the operations.

    3. Q: What would be the major tasks ahead for the inter-agency meeting this year?

    A: First is to study on the governing rules on the credit-guarantee-company-owned capital, on the credit re-guarantee institutions, and on the cross-provincial branch institutions, etc.

    Second is to consult with related departments on the policy-related issues of the sustainable development of credit guarantee industry, in an effort to promulgate related supporting policies that would facilitate the cooperation between banks and credit guarantee companies, and the optimization of the external environment of the industry.

    Third is to do the follow-up work of the overhaul, to put more effort on risk warning and guidance, and to urge the implementation of the Rules and its supporting rules.

    Fourth is to promote the establishment of supervisory information system of credit guarantee companies to enhance transparency, and to build up the self-disciplinary structure of credit guarantee industry at an early date.

    Fifth is to establish a performance evaluation system for the CBRC local offices to enhance their supervisory execution.

    4. Q: What would be the priorities for the CBRC local offices this year?

    A: First is to complete the follow-up work of the overhaul, including summarizing the previous work , focusing on correction of the problems.

    Second is to implement the Rules and its supporting rules, focusing on prompting the credit guarantee companies to strengthen corporate governance, fit-and-proper test for senior executives, corporate governance, internal control, and information disclosure, etc.

    Third is to strictly control the risk of credit guarantee companies. Until now, the internal controls of some companies remain inadequate. Some have the problems of insufficient capital or capital flight; they pursue highly-risky and highly-rewarding activities outside their major field, which posed individual institutional risks. What also deserves our attention are the potential credit risk triggered by the rapid increase of the guarantee activities and the highly concentrated, along with the risks posed by the fact that some of the credit guarantee companies are on the way to create new funding platform.

    Fourth is to push forward the development of credit guarantee industry: to create favorable measures to promote the orderly development of local credit guarantee industry according to related national policies: to guide credit guarantee companies to focus on major business, embark on reform and innovation, well handle the relationship between the quality and quantity of institutions; and to establish a number of successful companies with sound corporate governance, internal control and effective risk controls.

    Fifth is to improve supervisory policies and measures and to improve ongoing supervision. The CBRC local offices should strengthen the supervisory structure, enhance the allocation of staff and resources, speed up the establishment of the supervisory information system, effectively improve financial supervision measures, explore the possibility of differentiated supervision, improve day-to-day analysis and monitoring, and enhance the supervisory effectiveness.

    Sixth is to strengthen staff training and talent recruitment work.

    5. Q:What are the major differences between credit guarantee companies and non-credit guarantee companies?

    A: In accordance with State Council Document No. (2009)7 and the Rules, credit guarantee companies refer to the limited liability companies, joint stock limited liability companies, and other non-corporate institutions which run credit guarantee business. The major differences from non-credit guarantee companies are as follows:

    (1) Under present rules, the operation of credit guarantee companies needs approval from the CBRC local offices and obtain the license before registering at Industrial and Commercial Administration or other related administrations. On the other hand, non-credit guarantee companies do not need to obtain market access permission or administrative approval so long as they conform to Company Law. According to the Rules, the use of “credit guarantee” in the title of the company without permission would be rectified and punished by the CBRC local offices. Simply speaking, credit guarantee companies are licensed institutions while non-credit guarantee companies are not.

    (2) Credit guarantee operation needs to be licensed. Under the Rules, credit guarantee companies can run non-credit guarantee business, while non-credit guarantee companies operating credit guarantee business would be punished and banned.

    (3) Licensed credit guarantee companies are supervised by the CBRC local offices. Apart from licensing, the qualification of senior executives and business activities need to be approved as well. There are no such requirements for non-credit guarantee companies.

    6. Q: How should consumers make choices if they would like to apply loans from banks via guarantee institutions?

    A: In accordance with the Notice on Promoting the Cooperation between Banking Institutions and Credit Guarantee Companies (CBRC Document  No. (2011) 17, hereinafter referred to as Notice on Bank-Guarantee Cooperation), starting from March 31, 2011, banking institutions should cooperate credit guarantee companies with licenses. Therefore, consumers should first check out if the credit guarantee company is licensed, and then consider its credit standing and its capability to assume guarantee liabilities.

    7. Q: It is reported that nowadays some credit guarantee companies are practicing illegal fund-raising, illegal collection of public deposits and usury. What attitudes does the inter-agency meeting take towards this?

    A: As far as we know, those rule-breaking institutions are mainly non-credit guarantee companies, which are not under the supervision of the inter-agency meeting nor the CBRC local offices. Their behavior severely damaged the image and reputation of credit guarantee institutions and the whole industry, and posed threats to local financial stability. Those rule-breaking institutions should be punished and called off by related administrations.

    8. Q: Does the inter-agency meeting have any plan to promote the bank-guarantee cooperation?

    A: Intensifying the bank-guarantee cooperation will bring win-win outcome and will help alleviate the difficulty in financing for SMEs. The Notice on Bank-Guarantee Cooperation released by the CBRC earlier this year has laid out the plan in this area. In addition, the inter-agency meeting would take measures to strengthen the cooperation, and the major uneasiness are as follows:

    First is to guide banking institutions to evaluate the qualifications of credit guarantee companies. Before approving the bank-guarantee cooperation, the key evaluation areas will include the licensing, sound business operation, risk controls and credit standing.

    Second is to urge banking institutions to implement the preferential policies concerning the lending rate, charges and evaluation system of SMEs.

    Third is to study risk distribution and margin deposit, and guide the two sides to improve the present cooperation mechanism based on their consultation and agreement.

    9. Q: As one of the major task since last year, what’s the progress of the overhaul?

    A: In line with the Rules and the work plan of the inter-agency meeting, local governments have organized investigation into the real situation and formulated plans for the overhaul. They have conducted risk inspection on the present credit guarantee companies, corrected the problems, carried out re-examination and delivered licenses to the qualified ones. The majority of the local overhauls were largely completed on March 31 this year, though some remained unfinished. Until the end of May, among the 9,192 companies that have been listed in the overhaul, the examination and correction of 8,732 cases has been completed (95% of the total), 326 are under way, and 134 yet to be started. 6,473 institutions are proved qualified, and 5888 licenses have been granted across the country.


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