Local banks are to be allowed to provide online loans to new clients starting from September, but they need to conduct know-your-customer checks as a safeguard against money-laundering or bad debts, the Financial Supervisory Commission (FSC) said on Tuesday.
Banks currently can only extend online loans to clients who have a deposit account or credit card with them, while prospective clients have to visit a bank’s physical branch to submit an application, Banking Bureau Deputy Director Sherri Chuang (莊琇媛) told a news conference.
The Bankers’ Association of the Republic of China has since last year urged the commission to allow lenders to provide online loans to new clients, saying it would help them expand their online lending business and boost revenue, Chuang said.
As the demand for online loans has risen stably over the past four years, while the non-performing loan ratio has remained low, the commission finally agreed to the regulatory easing, Chuang said.
In March this year, online consumer loans had grown to NT$514 billion (US$16.52 billion), which shows their great potential as they were first offered in 2015, the commission said, adding that the figure is still a fraction of total lending, which stands at NT$27.8 trillion.
With the regulatory approval, the association plans to amend its regulatory code by the end of next month, which would enable banks to provide the new service in September at the earliest, Chuang said.
Online lending has caused some problems in other countries and the ease of applying for a loan has encouraged consumers to increase their credit.
Online lending platforms in China had been blamed for generating an estimated 60 billion yuan (US$8.72 billion) of bad debt in 2017, data provided by Democratic Progressive Party Legislator Lin Chun-hsien (林俊憲) showed.
The commission would require all banks to carry out know-your-customer procedures and check the “Five Ps” — personal credit scores, the purpose, the source of payment, protection and perspective — before approving a loan, Chuang said, adding that these measures cannot be completed injust a few minutes.
New clients would be asked to submit identification documents and financial statements online, and they might still need to visit the bank if the lender thinks it necessary, the bureau said.
The commission would continue to monitor banks’ bad debt ratios after the new service is launched, and would ask lenders to adopt stricter standards for approval if their ratio increases, she said.
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