Chinese policymakers are cracking down on the nation’s peer-to-peer (P2P) lending sector, accusing some firms on Wednesday of running Ponzi schemes and engaging in illegal fundraising activities.
China’s Banking Regulatory Commission (CBRC) said that P2P lenders would be barred from taking public deposits or selling wealth-management products to finance lending activities.
It also stated that lenders must appoint qualified banks as custodians over client funds and improve current information disclosure standards.
Alongside tighter restrictions on firms within the sector, the CBRC also placed limits on the amount individuals and corporations could borrow from P2P lenders.
According to Bloomberg, the CBRC stated that individuals could borrow as much as 1 million yuan ($150,000) from P2P sites, including a maximum of 200,000 yuan from any one site. Corporate borrowing limits were capped at five times those levels, noted Bloomberg.
The move follows a series of scandals in the sector, highlighting the loose levels of regulation currently governing the sector.
Ezubao, once China’s biggest P2P lending platform, folded earlier this year after it turned out to be a Ponzi scheme that solicited 50 billion yuan in less than two years from more than 900,000 retail investors through savvy marketing, said Reuters following the CBRC announcement.
As yet, retail investors have been unable to get their money back.
Xinhua, citing the CBRC, stated that there were 1,778 P2P lending platforms with operational problems as at the end of June, accounting for more than 40 per cent of the total.
Outstanding loans issued by P2P platforms has reached 621.3 billion yuan (about 93.6 billion U.S. dollars), the state-run news agency said.