Stock Market Boom: Strengthening Post-Loan Management for Consumer Loans
Recently, a screenshot of borrowing money to invest in the stock market has been wildly circulated on social media platforms. In response, many users commented, "The current consumer credit cost has generally fallen below an annual interest rate of 3%, coupled with the convenience of application, it is a 'good' time to invest in the market."
Recently, the transaction volume of the Shanghai and Shenzhen stock markets has approached 3.5 trillion yuan, setting a new historical record and attracting many investors to enter the market. Under the heat of the stock market, the loan market is also surging. First, loan intermediaries (professional institutions or individuals who assist borrowers in obtaining loans) posted posters in their social circles recommending borrowers to apply for consumer loans to invest in stocks, and then KOLs (Key Opinion Leaders) on social media platforms began to discuss the issue of borrowing money to invest in stocks.
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It has been reported that financial regulatory authorities have provided guidance to commercial banks, requiring financial institutions to pay great attention to investor suitability management and investor protection, strengthen internal control and compliance management, and strictly control leverage. Reporters from China Business News found that many financial institutions have not received relevant information, but have begun to conduct stricter inspections of the flow of funds.
It can be seen that this month, Guangdong Heyuan Rural Commercial Bank Co., Ltd. (hereinafter referred to as "Heyuan Rural Commercial Bank"), Fujian Mingxi County Rural Credit Cooperative Union, Songxi County Rural Credit Cooperative Union, and other institutions have also successively issued reminders, urging customers to use credit funds in accordance with the agreed purposes of the loan contracts and not to enter the stock market and real estate market in violation of regulations.
Management pain points are generally present.
Through understanding, reporters learned that the current industry's ability to monitor the flow of loan funds still has its limitations.
"Generally, banks can only check up to three levels (transferring through three accounts), and transferring through four levels is generally not traceable. For example, from Bank A to Bank B, and then to the securities company can be monitored. However, if there is another transfer through Bank C in between, it will greatly increase the difficulty of bank monitoring," a middle-level bank official told reporters.
For a long time, regulators have explicitly prohibited bank credit funds from entering the stock market.
In 2006, the former China Banking Regulatory Commission issued a notice warning of the risks of bank credit funds directly or indirectly entering the stock market, requiring all banks to strictly prohibit any enterprises and individuals from misappropriating bank credit funds to directly or indirectly enter the stock market. For the behavior of misappropriating loans to buy and sell stocks, banks must take necessary measures to recover immediately.
In July of this year, the Shanghai Regulatory Bureau of the China Banking and Insurance Regulatory Commission (hereinafter referred to as the "Shanghai Regulatory Bureau") also issued a penalty to a licensed consumer finance company. The administrative penalty information shows that the consumer finance company was fined 1.45 million yuan for not being diligent in the pre-loan investigation of personal consumer loans, personal consumer loans illegally flowing into the stock market, and not being diligent in managing consumer complaint channels.On July 10th, the Shanghai Regulatory Bureau also disclosed multiple bank penalty notices, with several banks in the same industry being penalized for involvement in "funds illegally flowing into the stock and real estate markets."
In September of the same year, the Tianjin Regulatory Bureau of the China Banking and Insurance Regulatory Commission warned consumers to be vigilant against the risks of over-indebtedness and to use personal consumer credit loans reasonably and in compliance with regulations. It pointed out that one should adhere to a moderate level of debt and a rational consumption concept, develop good consumption repayment habits, and avoid unrestrained consumption and excessive debt. On the basis of not exceeding one's own ability to bear, the role of consumer credit products in supporting consumption should be reasonably leveraged. Personal consumer credit loans such as consumer installments and small loans should not be used for non-consumer areas such as financial management, investment, housing purchases, and debt repayment, to avoid illegal behaviors such as "borrowing to repay loans" and "using cards to support cards."
In October, Heyuan Rural Commercial Bank announced that, in accordance with the relevant regulations of the national financial regulatory authorities on credit funds, credit funds must not illegally flow into the real estate market and must not be used for stocks, futures, financial derivatives, or other purposes prohibited by relevant national laws, regulations, and rules. If customers are found to have illegally diverted credit funds to the aforementioned areas, the bank will take back the loan in advance. The bank urges all customers to strictly abide by the regulations of the national regulatory authorities and to use credit funds in a standardized manner.
A practitioner from a joint-stock commercial bank told reporters that, in the current hot capital market environment, financial institutions do indeed pay more attention to internal control and compliance management, such as increasing telephone callbacks and strengthening the verification of post-loan use vouchers to monitor the flow of funds.
The aforementioned practitioner introduced that the current measures mainly include: incorporating the prohibition of personal consumer loans illegally flowing into the stock market into the loan contract; strengthening compliance propaganda, especially providing compliance prompts during the payment stage; and using big data and artificial intelligence technology to improve the timeliness and accuracy of risk identification.
Reporters learned from financial institutions that for violations of loan agreements, such as the misappropriation of credit funds for stock trading, the industry has always adopted strict control measures. Once it is discovered that the loan is used for prohibited purposes as stipulated by regulations, the quota will be frozen in a timely manner, and customers will be notified that they need to terminate the contract in advance. If customers fail to settle the illegal funds as agreed in the contract, industry companies will take measures including but not limited to judicial litigation to protect their legal rights and interests.
Wang Pengbo, a senior analyst at Broadcom Analysis in the financial industry, said that on the one hand, when the stock and real estate markets are performing well, there are always people who want to increase leverage; on the other hand, some banks also face difficulties in post-loan management and are unable to effectively track and manage the use of loan funds. Some banks, in the process of business development, pay too much attention to the expansion of loan scale and do not pay enough attention to loan quality and risk control, which is also one of the reasons.
In Wang Pengbo's view, low-interest consumer loans entering the stock market are actually leveraged behaviors. Once the market encounters adverse trends, losses will be amplified due to the leverage effect. If stock prices fall, the losses will far exceed the situation of using one's own funds.
"For the financial market, it will obviously lead to capital misallocation, amplify asset bubbles, and once the stock market encounters problems, risks will quickly spread to financial institutions, leading to an increase in non-performing loans of banks and a decline in asset quality," Wang Pengbo emphasized.
Wang Shiqiang, a senior figure in the financial technology industry, said that in addition to the bank's own account being able to monitor fund flows, there are currently no very effective measures. Commercial banks can only require customers to promise when borrowing that the loan cannot be used for down payments for housing loans, investing in the stock market, etc.Wang Peng, a research fellow at the Beijing Academy of Social Sciences, stated that currently, general banking institutions and non-bank lending organizations take measures that include rigorously reviewing the loan purposes of borrowers before loan disbursement to ensure that the loan funds are used for personal consumption rather than investment in the stock market. After the loan is issued, the flow of loan funds is tracked and monitored through bank account statements and transaction vouchers.一旦发现资金流向异常，如流入股市，将立即采取措施。
Wang Pengbo also stated that banks should verify the purpose of loans and establish a robust post-loan fund monitoring system. Through bank account statements and transaction vouchers, the flow of loan funds is tracked and monitored.一旦发现资金流向异常，如资金流入房地产市场、股市等禁止性领域，及时进行调查和处理。
However, the reporter learned from several insiders in financial institutions that traditional post-loan supervision measures are similar, including telephone follow-ups and post-loan purpose voucher verification.
Technology is emerging as a solution
It is worth mentioning that the aforementioned difficulties are still expected to be resolved through technological means.
Wang Peng said that establishing a risk early warning mechanism and strengthening cooperation and information sharing are the main methods, such as using big data and artificial intelligence technology to establish a risk early warning mechanism to monitor and warn potential fund violations into the stock market in real-time.
Wang Peng introduced that currently, using big data, artificial intelligence, and other technologies can improve the efficiency and accuracy of risk identification.
"For example, by using big data and artificial intelligence technology to build a risk identification model, it can monitor and analyze the transaction behavior and fund flow of borrowers in real-time, identifying potential fund violations into the stock market risk," Wang Peng said.
However, some people believe that through the so-called intelligent post-loan management system, achieving automation and refinement of post-loan management through technological means cannot discover all problems.
In response, China Post Savings Bank (601658.SH) under China Post Consumer Finance Co., Ltd. (hereinafter referred to as "China Post Consumer Finance") said that its loan purpose control runs through the entire loan life cycle. During the customer loan application stage, it reminds of the relevant requirements of the loan purpose; during the approval process, it conducts manual telephone verification for high-risk loans; during the loan disbursement process, it carries out purpose follow-ups. In addition, the company continues to promote risk investigation, strengthen case prevention, audit supervision work, and strengthen customer information protection work to prevent and resolve risks from the source. At the same time, it continuously improves and perfects the rules and regulations, guides and supervises daily work, and comprehensively improves its own compliance management capabilities.China Post Consumer Finance stated that the company places great emphasis on internal control and compliance management. In accordance with regulatory requirements, the company continuously implements compliance control over the use of loan funds through technological means. Not long ago, the company officially launched the "Sunshine Credit Year" campaign to strengthen risk control and compliant operations, effectively prevent and control financial risks, maintain the stability of the financial market, and protect the legitimate rights and interests of consumers.
Wang Pengbo told reporters that current technological means have great potential in achieving full transparency and traceability.
"The company cooperates with external platforms, using advanced financial technology products and services to assist in monitoring bank card transactions, strengthen business collaboration, and fully implement regulatory requirements. At the same time, by applying innovative technologies such as blockchain and cloud computing, the security and flexibility of financial transactions are significantly improved," said a person in charge of China Post Consumer Finance.