Tightened regulations on online lending to benefit consumer loan ABS: Moody's

Updated 2018-01-23 10:22:02 Xinhua

China's new regulations on web-based micro lending are credit positive for consumer loan asset-backed securities (ABS), a Moody's report said Monday.

"The new regulations will ensure that only strong loan originators remain in the sector and improve underwriting standards and risk controls," said Elaine Ng, a vice president and senior analyst at the rating company.

Chinese banking regulators have rolled out stricter rules to clean up internet lenders amid increasing risks in the booming but loosely regulated market, with approval of online micro lenders halted and lending activities rigorously supervised.

"The regulations also prohibit certain types of loans, which will result in a better quality of underlying loans in ABS," Ng added.

The market will shrink as a result of the tightening, which will in turn lead to increasing defaults in the short term, particularly among borrowers with weak credit profiles and those relying on new loans to repay outstanding debts, the report said.

The issuance of ABS backed by micro loans has declined since the new rules were introduced.

Moody's expects that some originators may need additional capital to bring down their leverage ratios to the permitted level or adjust product offerings to stay compliant with the new rules. At the same time, new issuance will likely remain subdued.

China's micro-lending market has seen explosive growth in recent years, as lending platforms offer easy cash loans to needy consumers. But the industry's relentless growth and lack of regulation have left both lenders and borrowers unprotected, with reports of defaults and malicious debt collection emerging.

Also in the News

Nicole Kidman Recalls Oscar Glory: Loneliest Time
Showbiz2016/06/16 13:58November 20 2018 21:45:26

Nicole Kidman Recalls Oscar Glory: Loneliest Time

Attending Shanghai International Film Festival, Nicole Kidman talks about her role in "Grace of Monaco".

Labor Day Travel Peak Starts
Also in the News2014/05/01 12:16November 20 2018 21:45:26

Labor Day Travel Peak Starts

Johnny Depp Delivers a Speech 'Evolve the Future' in 'Transcendence'
Also in the News2014/04/18 13:18November 20 2018 21:45:26

Johnny Depp Delivers a Speech 'Evolve the Future' in 'Transcendence'

Hollywood star Johnny Depp's speech in the upcoming new film "Transcendence" has been disclosed on Friday, April 11th.

China World Business Sports Showbiz Audio
C4 My Chinese Life The Sound Stage China Revealed Showbiz Video Travel Video
China World Fun Travel Entertainment Sports
Beijing Shanghai Guangzhou
Live Music Opera & Classical Movies Traditional Shows Exhibitions
Learn Chinese:
Chinese Studio Living Chinese Everyday Chinese Just For Fun Chinese Culture Buzzwords