The PBOC and CBIRC have formally barred banks from selling personal fixed deposit products online via third party platforms, citing regulatory violations.
The PBOC (People’s Bank of China) and CBIRC (China Banking and Insurance Regulatory Commission) have jointly issued new requirements for commercial banks governing the sale of personal deposit products online.
The new rules are aimed at strengthening supervision and management over the sales of deposit products online by banks, maintaining market order, preventing financial risks, and protecting consumers, the regulators said.
While the sale of personal deposit products online has helped banks to broaden their channels for acquiring customers and improved service efficiency, regulators are concerns of the associated risks, including “irregular product management” and insufficient consumer protection.
The new rules explicitly prohibit banks from using online methods to circumvent or evade regulatory requirements. In particular, the local and regional banks prohibited from offering deposit products beyond the geographical limits allowed by their licences.
The new rules also seek to strengthen risk control management at banks that conduct deposit business through the Internet, requiring them to assess business risks, improve their risk governance structures, and implement risk monitoring and control mechanisms.
Banks are also required to strengthen their management of sales behaviour in relation to deposit products offered through online channels, including by enhancing network security and ensuring the protection of customers’ personal data.
The rules also clarify that banks may not conduct fixed deposit business through online platforms operated by third parties. Such products already issued will be allowed to naturally settle at maturity.
“Currently, insurance companies and fund companies sell related products through non-self-operated online platforms and are subject to corresponding supervision,” the regulators said. “As the most basic financial service, deposits should be subject to stricter supervision.”
The use of third-party platforms to sell deposit products has been a high growth area of internet finance in recent years, but it has led to banks violating interest rate setting requirements, geographical restrictions and liquidity management guidelines.
In December, financial services arms of Chinese tech giants Ant Group, Tencent, JD.com, Baidu, Didi Chuxing, Meituan, Xiaomi and Lufax stopped offering products that allow consumers to make deposits with bricks-and-mortar banks.
Under the new rules, banks may still cooperate with third party platforms to open Type II accounts for consumers, which are primarily used for consumption and have restrictions of CNY 10,000 in payments per day.
The new rules are available here.