Five departments jointly issued the "Notice on Strengthening Support for Credit Loans to Small and Micro Enterprises."

To thoroughly implement the Party Central Committee and the State Council’s decisions and arrangements on coordinating the prevention and control of COVID-19 with economic and social development, address the pain point of small and micro enterprises lacking collateral guarantees, and increase the proportion of credit loans for such enterprises, the People’s Bank of China, the CBIRC, the Ministry of Finance, the National Development and Reform Commission, and the Ministry of Industry and Information Technology jointly issued the “Notice on Strengthening Support for Credit Loans to Small and Micro Enterprises” (Yin Fa [2020] No. 123). Number, hereinafter referred to as the “Notice”).

The Notice clarifies that, starting from June 2020, ... Starting from the 1st of the month, the People's Bank of China will use a special quota of 400 billion yuan in re-lending through innovative monetary policy tools to purchase 40% of new inclusive small and micro enterprise credit loans issued by eligible local legal banks between March 1 and December 31, 2020. This measure is intended to encourage banks to increase their lending of credit loans to small and micro enterprises, thereby helping more such enterprises obtain credit loans without requiring collateral or guarantees.

The Notice emphasizes that all banking and financial institutions should place greater emphasis on reviewing the primary source of repayment, reduce reliance on collateral guarantees, enrich the range of credit loan products, and ensure a significant increase in the proportion of inclusive small and micro enterprise credit loans in 2020.

Notice from the People's Bank of China, the CBIRC, the Ministry of Finance, the National Development and Reform Commission, and the Ministry of Industry and Information Technology on Strengthening Support for Credit Loans to Small and Micro Enterprises

Yinfa [2020] No. 123 Number

The Shanghai Head Office of the People's Bank of China, all branches and business management departments, central branches in provincial capital (or capital) cities, and central branches in vice-provincial-level cities; all banking and insurance regulatory bureaus; finance departments (bureaus), development and reform commissions, and departments in charge of small and medium-sized enterprises in each province, autonomous region, municipality directly under the central government, city under separate planning, and Xinjiang Production and Construction Corps; the China Development Bank, all policy banks, state-owned commercial banks, joint-stock commercial banks, and the Postal Savings Bank of China:

To thoroughly implement the Party Central Committee and the State Council’s directives on coordinating the prevention and control of COVID-19 with economic and social development, In accordance with the development work deployment and the requirements set forth in the Government Work Report, we will strengthen policies supporting stable enterprises and employment. The People's Bank of China, together with the Ministry of Finance, will utilize a special quota of 400 billion yuan in relending facilities to purchase inclusive small and micro enterprise credit loans issued by qualified local corporate banking financial institutions at a specified ratio through innovative monetary policy tools. This initiative will encourage banks to increase their lending of credit loans to small and micro enterprises, thereby helping more such enterprises obtain credit loans without requiring collateral or guarantees. With the approval of the State Council, we hereby notify you of the following relevant matters:

I. Policy Supporting the Purchase of Inclusive Small and Micro Business Credit Loans

Since June 2020 Starting from the 1st of the month, the People's Bank of China will, through monetary policy tools, purchase quarterly a portion of newly issued inclusive small and micro enterprise credit loans extended by eligible local corporate banking financial institutions. Eligible local corporate banking financial institutions include city commercial banks, rural commercial banks, rural cooperative banks, township and village banks, rural credit cooperatives, and private banks that have recently received a central bank rating ranging from Level 1 to Level 5. The scope of these purchases covers 40% of newly issued inclusive small and micro enterprise credit loans made by eligible local corporate banking financial institutions between March 1 and December 31, 2020, with loan terms no shorter than six months.

After the People's Bank of China purchases the aforementioned loans through monetary policy tools, it entrusts the lending banks with their management. The lending banks will collect interest on the portion of the loans they have purchased, and they will also bear any losses from bad debts. The lending banks shall repay the funds used to purchase these loans in full, at the original amount, one year after the date of purchase.

II. Increase the intensity of lending to inclusive small and micro enterprises.

All banking and financial institutions should increase the allocation of credit resources to small and micro enterprises, optimize risk assessment mechanisms, place greater emphasis on reviewing the primary source of repayment, reduce reliance on collateral and guarantees, and support more small and micro enterprises in obtaining pure credit loans that require neither collateral nor guarantees. This will ensure a significant increase in the proportion of inclusive small and micro credit loans in 2020.

All banking and financial institutions should actively leverage financial technologies such as big data and cloud computing to integrate internal and external credit information, thereby enhancing their ability to assess and manage credit risks among small and micro enterprises. They should tailor their credit loan product offerings to the specific financing needs and characteristics of small and micro enterprises, and encourage increasing the medium- and long-term credit limits for these loans. They should also make reasonable adjustments... Delegate approval authority to improve the efficiency of issuing credit loans to small and micro enterprises.

Local banking and financial institutions that receive support should set growth targets for the issuance of inclusive small and micro enterprise credit loans, pass on policy benefits to small and micro enterprises, and make concerted efforts to reduce interest rates on credit loans. A framework should be established by March 2020. Starting from the 1st of the month, a special ledger shall be maintained for the issuance of inclusive small and micro enterprise credit loans. This ledger must be promptly reported to the local branches of the People's Bank of China and the dispatched agencies of the CBIRC, and the data provided must be truthful, accurate, and complete. It is essential to conduct thorough pre-loan reviews and effective post-loan management; enterprises may be required to submit commitment letters guaranteeing stable employment. During the loan period, enterprises shall maintain basic stability in their employment levels. We must carefully manage credit risks and effectively prevent the accumulation of financial risks.

  3. Strengthen collaboration, clarify responsibilities, and ensure rigorous implementation.

  Branches of the People's Bank at all levels, branches of the CBIRC, and departments of finance, development and reform, and industry and information technology should strengthen coordination and collaboration, enhance policy implementation and delivery, and ensure rigorous enforcement to support the normal operations of small and micro enterprises and stabilize employment. By launching special campaigns focused on credit loans and adopting various other approaches, they should enhance the capacity of banking and financial institutions within their jurisdictions to provide credit loans to small and micro enterprises.

  Branches of the People's Bank of China, in coordination with the local branches of the CBIRC, shall closely monitor and evaluate the disbursement of credit loans by banking financial institutions within their jurisdictions, thereby guarding against moral hazards and financial risks in policy implementation, promoting a significant increase in the proportion of inclusive small and micro enterprise credit loans, and ensuring that the policy achieves tangible results.

This notice shall take effect from the date of its issuance.

  People's Bank of China, CBIRC

Ministry of Finance, National Development and Reform Commission, Ministry of Industry and Information Technology

2020 June 1st of the year