At the beginning of 2025, the small loan industry will usher in significant new regulations. Recently, the State Administration of Financial Supervision and Administration of China issued the "Interim Measures for the Supervision and Administration of Small Loan Companies" (hereinafter referred to as the "Measures") to regulate the business behavior of small loan companies. The Measures shall come into effect from the date of issuance, and the Notice of the General Office of the China Banking and Insurance Regulatory Commission on Strengthening the Supervision and Management of Small Loan Companies shall be simultaneously abolished. Overall, the Measures clarify the business scope and loan concentration ratio requirements of small loan companies, optimize the upper limit standard for single household loan balance, and highlight the positioning of small and diversified businesses; Strictly prohibit illegal "channel" businesses such as renting and lending licenses; Standardize external financing, strictly implement the "1+4" financing leverage ratio index, and clarify the conditions for small loan companies to issue bonds and asset securitization products. Specifically, the Measures strengthen corporate governance and risk management by refining the requirements for related party transaction management. Refine the requirements for managing related party transactions, clarify the criteria for classifying non-performing loans, and implement special account management for the lending funds of small loan companies. Standardizing the business system of online small loan companies should meet the requirements of online operation throughout the entire process, a sound risk prevention and control system, and compliance with network and information security management requirements. Require small loan companies to implement a list system and other management measures for cooperative institutions. The Measures stipulate that small loan companies shall not exceed 10% of the net assets of the same borrower at the end of the previous year in terms of the balance of various loans, and shall not exceed 15% of the net assets of the same borrower and its affiliates at the end of the previous year in terms of the balance of various loans. The balance of loans for a single household used for consumption by online small loan companies shall not exceed RMB 200000, and the balance of various loans for a single household used for production and operation shall not exceed RMB 10 million. At the local level of responsibility, the Measures stipulate that provincial-level local financial management institutions are responsible for the supervision, management, and risk disposal of local small loan companies. Major matters such as the establishment and termination of small loan companies shall be uniformly managed by provincial local financial management institutions and shall not be delegated. Respondents generally believe that the introduction of the "Measures" will help improve the regulatory system for small loan companies, guide the industry to enhance risk management and compliance, and consolidate the foundation for sustainable development. Ye Yindan, a researcher at the Research Institute of Bank of China, told Securities Daily reporters that for the small loan industry, the provisions of the Measures on information disclosure, risk warning, and unfair marketing can help reduce adverse competition within the industry and promote the development of the entire industry towards a more mature, transparent, and compliant direction. Refining consumer rights protection: The current industry reshuffle is intensifying. According to the statistics of small loan companies in the third quarter of 2024 released by the People's Bank of China, there were 5385 small loan companies nationwide by the end of September 2024; The loan balance is 751.4 billion yuan. Compared to the number of small loan industry companies as of the end of September 2014, the number has decreased by about 3200 in the past 10 years. The Measures refine the protection of consumer rights and interests, regulate the information disclosure, risk warning, marketing promotion, customer information collection and use of small loan companies, and strengthen the negative list supervision of violations and improper business practices; Further clarify the regulatory responsibilities of local financial management institutions, strengthen the sharing of regulatory information and work coordination between the central and local governments, and jointly guide the standardized and healthy development of the industry. When it comes to the future compliant development of small loan companies, Liu Bin, Director of the Financial Research Office of China (Shanghai) Free Trade Zone Research Institute, suggests that firstly, it is necessary to adjust the business structure and scale reasonably, and reduce the concentration of loans; The second is to strengthen the application of financial technology and improve service efficiency; Thirdly, actively explore business innovation and cooperation, innovate business models, and strengthen cooperation with banks and other financial institutions to achieve complementary advantages; The fourth is to strengthen internal control, enhance the management of cooperative institutions, implement list management, and prevent cooperative institutions from violating regulations and bringing risks to themselves. After the implementation of the Measures, small loan companies face stricter regulatory requirements. Ye Yindan suggested that small loan institutions need to actively adapt to the new regulatory environment, firstly, strengthen capital management and risk control. Especially in post loan management, bad debt control, and capital risk, ensure that risks can be detected in a timely manner and effective response measures can be taken. Secondly, optimize the financing structure and expand financing channels. Small loan companies should pay more attention to financing through standardized financing channels to reduce financing costs and risks. Pay attention to regularly evaluating its financing structure to ensure that the total amount of funds obtained through leveraged financing does not exceed the prescribed limit. Thirdly, establish a sound mechanism for handling customer complaints, improve the quality of customer service, and win the trust and support of consumers. Fourthly, strengthen the cultivation of compliance awareness and internal governance. Small loan companies need to further improve their internal compliance systems to ensure that all business processes comply with regulatory requirements. Especially in areas such as financing, customer information protection, and risk disclosure, compliance awareness should be strengthened and the transparency of operational processes should be ensured. (New Society)