Central Bank： Promote the establishment of a long-term mechanism for small and micro enterprises to dare to lend, be willing to lend and be able to lend.

Official website, the central bank, reported on the 26th that in order to implement the decision-making arrangements made by the CPC Central Committee and the State Council on stabilizing growth and market players, the People’s Bank of China recently issued the Notice on Promoting the Establishment of a Long-term Mechanism for Small and Micro Enterprises in Financial Services (hereinafter referred to as the "Notice") in view of the increasing difficulties of enterprises in some industries affected by the impact of the current epidemic, the insufficient endogenous motivation of financial institutions, and the insufficient role of external incentives and constraints. Starting with the factors that restrict the lending of financial institutions, in accordance with the principle of marketization, we will further deepen the structural reform of the supply side of financial services for small and micro enterprises, accelerate the establishment of a long-term mechanism, focus on improving the willingness, ability and sustainability of financial institutions to serve small and micro enterprises, and help stabilize market players, employment and entrepreneurship, and economic growth.

The "Notice" pointed out that it is necessary to improve fault-tolerant arrangements and risk mitigation mechanisms to enhance confidence in lending. All banking financial institutions should explore simple, objective and quantifiable internal identification standards and processes for due diligence exemption, and promote the implementation of due diligence exemption system. Accelerate the construction of a full-process risk control management system and improve the ability of small and micro enterprises to identify, warn and dispose of loan risks. We will implement the regulatory requirements for the non-performing tolerance of Pratt & Whitney small and micro loans and give priority to the write-off of non-performing loans of small and micro enterprises. Actively carry out business cooperation between government and bank guarantee, reasonably increase the guarantee magnification, simplify the guarantee process and improve the guarantee efficiency.

The "Notice" emphasizes that it is necessary to strengthen positive incentives and assessments to stimulate the motivation to lend. All financial institutions should firmly establish the concept of serving small and micro enterprises, make special arrangements in business strategy, development goals, mechanism and system, and improve the adaptability of financial supply to the needs of small and micro enterprises. Improve the cost sharing and income sharing mechanism, embed the quoted interest rate in the loan market into the internal pricing and transmission related links, improve the level of refined pricing, and promote the stable and declining comprehensive financing cost of Pratt & Whitney. Further improve differentiated performance appraisal, strengthen the application of policy effect evaluation, and continuously optimize the local financing environment.

The "Notice" requires that financial guarantee and channel construction be done well to consolidate the foundation of loans. Give full play to the dual functions of monetary policy tools in terms of total volume and structure, make good use of the tools of RRR reduction, refinancing and rediscount, and support small and micro loans for general benefits, and continuously increase the supply of small and micro loans for general benefits. Scientifically formulate the annual special credit plan for Pratt & Whitney Small and Micro-loans to ensure that the growth rate of Pratt & Whitney Small and Micro-loans is not lower than that of various loans. National banks should tilt to the central and western regions, areas with slow credit growth and areas and industries seriously affected by the epidemic. We will increase the issuance of financial bonds and capital supplementary bonds for small and micro enterprises, actively carry out securitization of credit assets, and broaden diversified sources of credit funds. We will continue to improve the franchise mechanism in inclusive finance and explore the formation of a batch, large-scale, standardized and intelligent microfinance service model. Strengthen departmental linkage, normalize multi-level financing docking, improve financing docking efficiency and reduce customer acquisition costs.

The "Notice" clarifies that it is necessary to promote technological empowerment and product innovation, and improve the level of lending. Improve the hierarchical and classified microfinance service system, strengthen the use of financial technology, rationally use big data, cloud computing, artificial intelligence and other technical means, innovate risk assessment methods, improve the efficiency of loan approval, and broaden the coverage of small and micro customers. Accelerate the sharing and application of credit information related to enterprises, enrich featured financial products, and promote the model of active credit granting and loan repayment with loan to meet the flexible demand of small and micro enterprises. Give play to the role of a unified registration and publicity system for movable property financing, a supply chain bill platform, and a financing service platform for the collection of accounts receivable to facilitate the financing of small and micro enterprises. Give full play to the joint efforts of inclusive support measures and targeted support measures, and increase financial support for key areas and difficult industries.

In recent years, the People’s Bank of China has carried out in-depth projects to improve the financial service capabilities of small and medium-sized enterprises, continuously optimized the financial policy system, strengthened the implementation of transmission, urged and guided financial institutions to optimize internal resource allocation and policy arrangements, and increased financial support for small and micro enterprises. At the end of April, 2022, the balance of Pratt & Whitney micro-credit loans was 20.7 trillion yuan, up by 23.4% year-on-year, and the growth rate of more than 20% was maintained for 36 consecutive months. The number of Pratt & Whitney micro-credit households was 51.32 million, up by 41.5% year-on-year, which was 1.9 times that of the end of 2019. In April, the interest rate of new loans for Pratt & Whitney small and micro enterprises was 5.24%, which was at a historically low level.

In the next step, the People’s Bank of China will strengthen organization and implementation, publicize and interpret policies, speed up the implementation of a package of measures to stabilize the economy, urge and guide all financial institutions to conscientiously implement the Notice, and strive to open up the "last mile" of the long-term mechanism, effectively improve the quality and efficiency of microfinance services, support the development of small and micro enterprises, and help stabilize growth, employment and basic people’s livelihood through stabilizing market players.

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Notice of the People’s Bank of China on Promoting the Establishment of a Long-term Mechanism of Financial Services for Small and Micro Enterprises: Dare to Lend, Willing to Lend, Ability to Lend.

In order to implement the decision-making arrangements of the CPC Central Committee and the State Council and the spirit of the Central Economic Work Conference, promote the establishment of a long-term mechanism for financial services for small and micro enterprises (hereinafter referred to as the long-term mechanism), strive to enhance the willingness, ability and sustainability of financial institutions to serve small and micro enterprises and other market entities, and help stabilize market entities, employment and entrepreneurship, and stabilize economic growth, the relevant requirements are hereby notified as follows.

First, adhere to the problem orientation and deeply understand the urgency and importance of establishing a long-term mechanism.

Small and micro enterprises are the new force of development, the main channel of employment and the important carrier of innovation. The CPC Central Committee and the State Council attached great importance to the development of small and micro enterprises, and asked the financial system to increase its support for the real economy, especially small and micro enterprises, so as to promote the obvious growth of small and micro loans, and the proportion of credit loans and first-time borrowers continued to increase. In recent years, the financial system has resolutely implemented the decision-making arrangements of the CPC Central Committee and the State Council, consciously improved its political position, and achieved positive results in serving small and micro enterprises. However, the endogenous motivation of financial institutions is insufficient, and the external incentive and restraint functions are not fully exerted. The problems of "fear of lending" and "reluctance to lend" still exist. To strengthen and improve the financial services of small and micro enterprises, the key is to improve the political and people-oriented nature in an all-round way. In accordance with the principles of marketization and rule of law, we should start with the factors that restrict the lending of financial institutions, deepen the structural reform of the supply side of financial services for small and micro enterprises, accelerate the establishment of a long-term mechanism, balance the relationship between increasing credit supply, optimizing credit structure and preventing and controlling credit risks, promote the increase, expansion and price reduction of financing for small and micro enterprises, support the development of small and micro enterprises, stabilize the macro-economic market and help the high-quality economic development.

Second, improve the fault-tolerant arrangement and risk mitigation mechanism, and enhance the confidence in lending.

(1) Optimize and improve the due diligence exemption system. All financial institutions should explore simple, objective and quantifiable internal identification standards and processes of due diligence exemption by establishing positive lists and negative lists, building complaint platforms, and strengthening publicity, so as to guide relevant post personnel to perform due diligence and appropriately increase the proportion of exemption and reduction. On the premise of effectively preventing moral hazard, the branches with non-performing loan ratio of small and micro enterprises that meet the regulatory requirements can be exempted or reduced from the responsibilities of deducting points, administrative sanctions, economic penalties and so on. If it is necessary to start the accountability procedure after the loan risk occurs, it is necessary to start the due diligence exemption identification procedure, carry out due diligence exemption investigation and evaluation, and identify the responsibility. It is necessary to promote the implementation of the due diligence exemption system and create a credit culture atmosphere of due diligence exemption through case guidance and experience exchange.

(2) Accelerate the construction of a full-process risk control management system. All financial institutions should strengthen the credit risk management and internal control mechanism of small and micro enterprises, strengthen customer access and credit evaluation before lending, credit rating and loan disbursement during lending, on-site inspection and off-site spot check after lending, and improve the ability of small and micro enterprises to identify, warn and dispose of loan risks. Actively build an intelligent post-lending management system, grasp the enterprise risk points such as suspicious loan subjects and abnormal capital flow and the quality of credit assets in a timely manner through big data analysis and multi-dimensional monitoring, and effectively identify and control business risks. Branches of the People’s Bank of China should urge financial institutions to strengthen the management of the use of loan funds for small and micro enterprises and monitor the abnormal situation, and it is strictly forbidden to fabricate arbitrage for loan purposes.

(3) Improve the disposal methods of non-performing loans of small and micro enterprises. All financial institutions should implement the regulatory requirements for the tolerance of non-performing loans for small and micro loans. For branches that do not exceed the tolerance standard, the profit loss caused by non-performing loans may not be considered or partially considered when the total benefit salary is accrued. Give priority to the write-off plan for non-performing loans of small and micro enterprises to ensure that they should be audited. Make good use of disposal methods such as batch transfer, asset securitization, restructuring and transformation to improve the quality and efficiency of non-performing loans disposal for small and micro enterprises. For long-term non-performing loans, strive to achieve the best disposal. Branches of the People’s Bank of China can write off and restore non-performing loans to the growth rate and increment of inclusive small and micro loans in various assessments, and encourage financial institutions to speed up the disposal of inclusive small and micro non-performing loans.

(four) actively carry out the business cooperation of bank, government and insurance. All financial institutions should actively cooperate with government financing guarantee institutions to carry out "loan-on-demand" and "loan-on-demand" batch guarantee business, reduce repeated due diligence, optimize guarantee processes, and improve guarantee efficiency. Deepen the "bank+insurance" cooperation, optimize the cooperative business processes such as policy pledge and loan guarantee insurance, and help small and micro enterprises to raise funds. Branches of the People’s Bank of China should, in conjunction with relevant departments, promote government financing guarantee institutions to reasonably increase the guarantee magnification, reduce the guarantee rate and counter-guarantee requirements, expand the coverage of small and micro enterprises, reduce or cancel the profitability assessment requirements, fulfill the compensation responsibilities in time according to the law, and appropriately increase the compensation ratio. Encourage qualified places to set up risk compensation funds to provide risk mitigation for micro-credit business.

Third, strengthen positive incentives and assessment, and stimulate the motivation to lend.

(5) Firmly establish the concept of serving small and micro businesses. All financial institutions should effectively enhance the consciousness of serving small and micro enterprises, make special arrangements in business strategy, development goals, mechanism and system, continuously improve financial services in light of the needs of small and micro enterprises, and enhance the adaptability of financial supply to the needs of small and micro enterprises. Further optimize the credit structure, gradually change the traditional preference for local government financing platforms and state-owned enterprises, reverse the tendency of "relying on large households", reduce long-term credit and excessive credit that exceed reasonable financing needs, and allocate more credit resources to support the development of small and micro enterprises.

(6) Optimize and improve the refined pricing level of loans. All financial institutions should continue to improve the cost sharing and revenue sharing mechanism, increase the preferential range of internal fund transfer pricing, adjust and optimize the measurement coefficient of economic capital occupation, and increase the inclined support for small and micro businesses. The quoted interest rate (LPR) of the loan market is embedded in the internal pricing and transmission related links, and the qualifications, operating conditions, guarantee methods and loan term of the micro-market are considered as a whole, so as to improve the refined pricing level and promote the steady decline of the comprehensive financing cost. Decentralize loan pricing authority appropriately to improve the efficiency of financial services of branches. For small and micro enterprises in industries and regions seriously affected by the COVID-19 epidemic, we will encourage the phased implementation of more favorable interest rates and service charges, reduce the penalty interest, and reduce the burden on enterprises in difficulty.

(7) Improve the differentiated performance appraisal mechanism. All financial institutions should further strengthen the guidance of performance appraisal, optimize the evaluation index system, reduce or cancel the assessment requirements for deposits, profits and intermediary business of small and micro businesses, and appropriately increase the index weights of credit loans and first-time borrowers. Linking the situation of financial services for small and micro enterprises with the assessment of branches as the main basis for salary incentives and evaluation. Reasonably increase special incentive wages, marketing expenses subsidies, business innovation incentives and other supporting supplies, and encourage the development of small and micro customers and product innovation. Do a good job in the decomposition and implementation of assessment objectives, ensure that all security and incentive policies are fulfilled in time, and fully mobilize the enthusiasm of branches and frontline employees.

(8) Strengthen the evaluation and application of policy effects. Branches of the People’s Bank of China should conscientiously carry out the evaluation of the credit policy-oriented effect of small and micro enterprises, and promote financial institutions to incorporate the evaluation results into the comprehensive performance appraisal of their branches. Strengthen the coordination of fiscal and financial policies, and promote local conditions to link the financial services of small and micro enterprises with financial awards and subsidies. Continue to carry out regional financing environment evaluation, improve the evaluation system, strengthen the application of evaluation results, and promote the continuous optimization of local financing environment.

Fourth, do a good job in capital guarantee and channel construction, and consolidate the foundation of energy loan.

(9) Give full play to the dual functions of the total amount and structure of monetary policy tools. All financial institutions should make full use of the long-term funds released by RRR cuts and the funds provided by structural monetary policy tools such as refinancing and rediscounting, and give priority to investing new credit resources in small and micro enterprises. Branches of the People’s Bank of China should make good use of universal micro-credit support tools to promote financial institutions to continuously increase the supply of universal micro-credit loans and issue more credit loans. We will continue to monitor the quality of deferred loans and universal micro-credit loans, and pay close attention to the maturity of deferred loans and changes in the quality of credit assets.

(10) Continue to increase the credit supply of small and micro enterprises. All financial institutions should focus on the goal that the growth rate of inclusive small and micro loans should not be lower than the average growth rate of various loans, scientifically formulate the annual special credit plan for inclusive small and micro loans, encourage qualified financial institutions to separate credit loans and first loan plans, strengthen monitoring and management, and ensure the special use of loans. National banks should decompose special credit plans to the central and western regions, areas with slow credit growth and areas and industries seriously affected by the epidemic. Loanable funds added by local corporate banks should be used to provide loans for agriculture-related and small and micro enterprises, so as to ensure the sustained and steady growth of agriculture-related and inclusive small and micro loans. Branches of the People’s Bank of China should promptly investigate and understand the formulation and implementation of the special credit plan for universal benefits of financial institutions within their jurisdiction, and strengthen supervision and guidance.

(eleven) to broaden the sources of diversified credit funds. Encourage financial institutions to revitalize existing credit resources through securitization of credit assets under the premise of legal compliance and controllable risks. Increase endogenous capital replenishment by increasing profit retention and appropriately controlling the growth rate of risky assets. We will continue to support small and medium-sized banks to issue perpetual bonds and secondary capital bonds, cooperate with relevant departments to guide local governments to make good use of the newly-added special debt quota to rationally replenish the capital of small and medium-sized banks, encourage banks with relatively good qualifications to raise funds through the equity market, and increase the replenishment of foreign capital. The pilot bank for balance management of financial bonds shall reasonably arrange the issuance scale of financial bonds for small and micro enterprises within the annual approval quota, and strictly regulate the use and management of raised funds. Branches of the People’s Bank of China should promptly arrange the demand for local corporate banks to issue financial bonds and capital supplementary bonds for small and micro enterprises, do a good job in counseling and communication, and improve the issuance efficiency. Encourage qualified areas to reward and supplement local corporate banks for issuing financial bonds for small and micro enterprises.

(12) Enhance the professional service capacity of microfinance. All financial institutions should focus on increasing the effective financial supply of small and micro enterprises and individual industrial and commercial households, continue to improve the franchise mechanism in inclusive finance, strengthen channel construction, promote the integration of online and offline development, and explore the formation of a batch, large-scale, standardized and intelligent micro-financial service model. We will continue to promote the construction of service outlets in inclusive finance, expand the marketing and post-loan management functions of small and micro businesses in an orderly manner, and appropriately delegate credit approval authority. Strengthen cross-line linkage, do a good job in small and micro enterprise accounts, settlement, consulting and other services, and promote diversified financing.

(XIII) Regularly carry out multi-level financing docking. Branches of the People’s Bank of China and financial institutions should strengthen cooperation with industry authorities, unblock the docking channels between banks and enterprises through offline active visits, online service platforms and industry authorities, improve the efficiency of financing docking, and reduce the cost of obtaining customers. Actively carry out business cooperation with various industrial parks, entrepreneurial service centers, enterprise incubation bases, associations and chambers of commerce, build specific docking scenarios by subject and product, and provide targeted financial services for different types of small and micro enterprises. Continue to track and monitor the financing of small and micro enterprises, dynamically optimize policies and measures, and respond quickly and accurately to the financing needs of small and micro enterprises.

Five, promote technology empowerment and product innovation, improve the level of credit.

(14) Improve the hierarchical and classified microfinance service system. Development banks and policy banks should strengthen the standardized management of lending funds to ensure that they are used for credit supply of small and micro enterprises, and innovate the supply chain financial model around core enterprises to explore the provision of direct lending services for upstream and downstream small and micro enterprises. National banks should play the role of "head geese", make full use of the advantages of outlets, talents and technology, effectively meet the needs of small and micro enterprises for comprehensive financial services, and improve the availability and convenience of financing. Local corporate banks should strengthen the orientation of supporting agriculture, combine the increase of micro-credit with the reform of insurance, give full play to the advantages of being close to the grassroots, form a distinctive product and service model, and focus on supporting the development of county economy and small and micro enterprises.

(fifteen) to strengthen the use of financial technology. All financial institutions should thoroughly implement the Financial Science and Technology Development Plan (2022— 2025) (Yinfa [2021] No.335 document issued), increase investment in financial technology, strengthen the protection of organizational personnel, and promote digital transformation in an orderly manner. Give full play to the role of financial technology innovation supervision tools, rationally use big data, cloud computing, artificial intelligence and other technical means, innovate risk assessment methods, improve the efficiency of loan approval, and broaden the coverage of small and micro customers. Focus on industry and regional resources to build digital customer acquisition channels, expand the ecological scene of micro-financial services, and improve the capacity of batch customer acquisition and the level of intensive business operation. Optimize the functions and business processes of enterprise online banking, mobile banking, WeChat applet, etc., and provide online measurement, fast loan application, online lending and other services for small and micro enterprises, so as to enhance the financing convenience of customers. Small and medium-sized banks with weak scientific and technological strength can improve their digitalization level and enhance their ability to serve small and micro enterprises by cooperating with large banks and technology companies.

(sixteen) to accelerate the application of credit information sharing of enterprises. All financial institutions should dig deep into their own financial data and external information data resources, play the role of basic database of financial credit information, and make accurate portraits of small and micro enterprises. Branches of the People’s Bank of China should rely on the construction of local credit reporting platforms, and further promote the open sharing of enterprise-related information of local government departments and public utilities to financial institutions and credit reporting institutions in accordance with the principle of "available and invisible data" and on the premise of ensuring that the original data does not leave the domain. Guide market-oriented credit reporting institutions to use new technologies, improve credit evaluation models, innovate credit reporting products and services, and strengthen credit reporting supply. Accelerate the popularization and application of "Yangtze River Delta Credit Information Chain", "Pearl River Delta Credit Information Chain" and "Beijing-Tianjin-Hebei Credit Information Chain" to promote cross-domain and cross-regional credit information interconnection.

(17) Enriching featured financial products. According to the characteristics of small and micro enterprises’ life cycle, industries, trading scenarios and financing needs, all financial institutions should continue to promote the innovation of credit products, reasonably set the loan term, optimize the loan process, and continue to promote the model of active credit granting and loan repayment to meet the flexible demand of small and micro enterprises. Enrich the supply of medium and long-term loan products by means of loan renewal and annual review. Relying on core enterprises, we will optimize financial services such as financing and settlement for small and micro enterprises upstream and downstream in the industrial chain, and actively carry out rights such as accounts receivable, advance payment, inventory, warehouse receipts and chattel pledge financing business. Give play to the role of the unified registration and publicity system for movable property financing, the supply chain bill platform and the accounts receivable financing service platform, broaden the scope of collateral and facilitate the financing of small and micro enterprises.

(eighteen) to increase financial support for key areas and difficult industries. All financial institutions should continue to increase credit for small and micro enterprises in the fields of scientific and technological innovation, green development and manufacturing, and support the cultivation of more "specialized and innovative" enterprises. In-depth study on the operating characteristics and financing needs of individual industrial and commercial households, increase the investment of entrepreneurial guarantee loans and credit loans, and provide more financial services for the development of individual industrial and commercial households. Encourage financing support for individual operators who meet the credit conditions but have not registered, and stimulate entrepreneurial momentum. In accordance with the principles of marketization and rule of law, improve the quality and efficiency of financial services for new citizens in the fields of entrepreneurship, employment and education. Branches and financial institutions of the People’s Bank of China should do a good job in financial services and support for difficult industries under epidemic prevention and control, strengthen communication and cooperation with the competent departments of commerce, culture, tourism, transportation and other industries, give full play to the joint efforts of inclusive support measures and targeted support measures, help enterprises to bail out, and avoid industrial loan restriction, loan withdrawal and loan suspension.

Six, strengthen the organization and implementation, and promote the construction of long-term mechanism to achieve practical results.

(nineteen) to strengthen the interpretation of policy propaganda. Branches of the People’s Bank of China and financial institutions should actively carry out policy publicity and interpretation, enrich publicity forms, increase publicity frequency and expand publicity scope. Through television, radio, newspapers, internet and other media, business outlets of financial institutions and online and offline financing service platforms, we will actively push financial support policies, financial products and services to market entities such as small and micro enterprises. Make full use of the official website of the People’s Bank of China, official Weibo, WeChat WeChat official account, press conference and other channels to exchange experiences, publicize typical cases and create a good public opinion atmosphere.

(twenty) to strengthen the implementation of the work. Branches of the People’s Bank of China should clearly be in charge of responsible comrades, responsible departments and responsible persons, and grasp the first level and implement it at all levels. It is necessary to effectively play a leading role, strengthen coordination and linkage with development and reform, industry and information technology, finance and taxation, transportation, commerce, cultural tourism, market supervision, banking and insurance supervision and other departments, and strengthen monitoring and supervision of the construction of long-term mechanisms of financial institutions within their jurisdiction. All financial institutions should fulfill their main responsibilities, promptly formulate specific implementation rules, carefully sort out and summarize the construction of long-term mechanisms, difficulties encountered and typical experiences, and get through the "last mile" of the implementation of long-term mechanisms. National banks will submit the implementation rules, lead departments and their responsible persons, contacts and contact information to the People’s Bank of China before the end of June 2022.