China tightens rules on $1.3 trillion credit card business

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People film the new panel of China Banking and Insurance Regulatory Commission (CBIRC), the newly merged regulator, at its office in Beijing, China April 8, 2018. REUTERS/Stringer

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SHANGHAI, July 8 (Reuters) – China unveiled tougher rules on Thursday evening to better regulate its $1.3 trillion credit card industry, urging lenders to adopt a “cautious” growth strategy and watch the risks more closely.

Banks are also not allowed to use the number of cards issued or market share as key performance indicators, and are required to limit the number of inactive cards to 20% of the total, under rules issued jointly by the central bank. of China and the country’s banking regulator. .

“The credit card business in China has been growing rapidly, playing a key role in facilitating payment and consumption,” the China Banking and Insurance Regulatory Commission (CBIRC) said in a statement posted on its website accompanying the publication of the new rules.

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“Recently, however, some banks … have been lax in risk management and behaved in ways that harm the interests of customers,” the regulator said.

Chinese banks issued a total of 800 million credit cards by the end of 2021, with outstanding loans totaling 8.62 trillion yuan ($1.29 trillion), according to the People’s Bank of China. About 86 billion yuan of credit card loans, or 1% of the total outstanding amount, have been past due for six months or more.

The new rules require banks to tighten supervision of credit card loans and strengthen risk management control.

Banks must also set up a public address system to monitor, identify, alert and prevent abuse in the credit card industry, in accordance with the rules.

($1 = 6.7005 Chinese yuan renminbi)

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Reporting by Samuel Shen and Brenda Goh Editing by Shri Navaratnam

Our standards: The Thomson Reuters Trust Principles.

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