China's banking and insurance watchdog has issued a rating system for consumer financial companies and those with the lowest grade may be forced to exit the market, in its latest move to tighten its grip on financial technology companies.
China Banking and Insurance Regulatory Commission will assign ratings to consumer financial firms annually based on corporate governance and internal control, capital management, risk management, quality of professional services and information technology management.
CBIRC rates from excellent to poor in the following manner: Grade 1, Grade 2, Grade 3, Grade 4 and Grade 5.
Consumer financial companies that are rated Grade 5 are considered incapable of normal operations and should submit rescue plans including merger, acquisition, restructuring and introducing strategic investors. A company can be forced to exit the market if no measures can be taken to salvage it.
The rating results will be used as a reference for regulators to take supervisory measures and will not be disclosed.