What is Liquidity Risk?

Working capital loans are loans issued to meet the short-term funding needs of production and business operators during production and operations, and to ensure the normal operation of production and business operations. According to the term of the loan, it can be divided into short-term working capital loans within one year and medium-term working capital loans from one to three years. According to the loan method, it can be divided into secured loans and credit loans. Among them, secured loans are divided into guarantees, mortgages and pledges. According to the way of use, it can be divided into short-term revolving loans that are applied for one by one, reviewed one by one, and short-term revolving loans that can be borrowed, used, and repaid within the time and limit set by the bank. As an efficient and practical financing method, working capital loans have the characteristics of short loan terms, simple procedures, strong turnover, and low financing costs, so they have become a popular banking business among customers.

Working capital loan

Bank unified management

according to"

Written loan application and the board's decision to approve the loan application (if necessary); Articles of Association,

1. File a loan application. The company proposes to the bank

Order of the CBRC of working capital loans

The "Interim Measures for the Management of Liquidity Loans" has been adopted by the 72nd Chairman's Meeting of the China Banking Regulatory Commission. It is hereby promulgated and will be implemented as of the date of its release.

Chairman: Liu Mingkang

February 12, 2010

Interim Measures for Working Capital Loans

Chapter I General Provisions

The first is to standardize the operating behavior of the working capital loan business of banking financial institutions, strengthen the prudent management of working capital loans, and promote the healthy development of working capital loans, in accordance with the "People's Republic of China Banking Regulatory Law" and the "Commercial Bank of the People's Republic of China" Law and other relevant laws and regulations, formulated these measures.

Article 2 Banking financial institutions (hereinafter referred to as lenders) established within the People's Republic of China with the approval of the China Banking Regulatory Commission shall comply with these Measures when operating liquidity loans.

Article 3 The term liquidity loans as mentioned in these Measures refers to loans in local and foreign currencies issued by lenders to corporate (event) business legal persons or other organizations prescribed by the state as borrowers for the daily production and operation turnover of the borrower.

Article 4 Lenders shall follow the principles of compliance with laws and regulations, prudent operation, equality and voluntariness, fairness and integrity in carrying out liquidity loan business.

Article 5 Lenders shall improve the internal control mechanism, implement full-process loan management, comprehensively understand customer information, establish a liquidity loan risk management system and an effective post check and balance mechanism, and implement the responsibilities of each link of loan management to specific departments and positions. And establish assessment and accountability mechanisms for each post.

Article 6 The lender shall reasonably calculate the working capital requirements of the borrower, carefully determine the total amount of working capital credit of the borrower and the specific loan amount, and shall not exceed the actual demand of the borrower to issue working capital loans.

The lender shall reasonably set the business type and term of the working capital loan based on the scale and cycle characteristics of the borrower's production and operation, so as to meet the borrower's production and operation capital requirements and achieve effective control over the withdrawal of loan funds.

Article 7 The lender shall incorporate the working capital loan into the unified credit management of the borrower and its group customers, and establish a risk limit management system based on the dimensions of the region, industry, and loan type.

Article 8 Lenders shall reasonably determine internal performance assessment indicators based on economic operating conditions, industry development laws, and the effective credit needs of borrowers, etc., shall not formulate unreasonable loan scale indicators, and shall not engage in vicious competition and surprise lending.

Article 9 The lender and the borrower shall agree on a clear and legal purpose of the loan.

Liquidity loans shall not be used for investment in fixed assets, equity, etc., and may not be used in areas and uses for which production and operation are prohibited by the state.

Working capital loans shall not be misappropriated, and the lender shall inspect and supervise the use of working capital loans in accordance with the contract.

Article 10 The China Banking Regulatory Commission shall supervise and manage liquidity loan business in accordance with these Measures.

Chapter II Acceptance and Investigation

Article 11 An application for a working capital loan shall meet the following requirements:

(1) The borrower is established in accordance with the law;

(2) The purpose of the loan is clear and legal;

(3) The borrower's production and operation are legal and compliant;

(4) The borrower has the ability to continue operating and has a legitimate source of repayment;

(5) The borrower's credit status is good and there is no major bad credit record;

(6) Other conditions required by the lender.

Article 12 The lender shall make requirements for the method and specific content of the application materials for working capital loans, and require the borrower to abide by the principle of honesty and trustworthiness, and promise that the materials provided are true, complete and effective.

Article 13 The lender shall perform due diligence in the form of a combination of on-site and off-site, form a written report, and be responsible for the authenticity, completeness and validity of its content. Due diligence includes but is not limited to the following:

(1) The organizational structure, corporate governance, internal control of the borrower, and the credit standing of the legal representative and the operation management team;

(2) The borrower's business scope, core business, production and operation, operation planning during the loan period, and major investment plans;

(3) the status of the borrower's industry;

(4) the true financial status of the borrower's accounts receivable, accounts payable, and inventory;

(5) Total borrower's working capital requirements and existing financing liabilities;

(6) Information about related parties and related transactions of the borrower;

(7) The specific purpose of the loan and the use of counterparty funds related to the loan purpose;

(8) Sources of repayment, including cash flow, comprehensive income and other legal income from production and operation;

(9) For secured working capital loans, it is necessary to investigate the ownership, value and difficulty of realizing the collateral (pledge), or the guarantor's guarantee qualifications and capabilities.

Chapter III Risk Evaluation and Approval

Article 14 Lenders shall establish a sound risk assessment mechanism, implement specific responsible departments and positions, and comprehensively review the risk factors of working capital loans.

Article 15 The lender shall establish and improve the internal rating system, adopt scientific and reasonable rating and credit granting methods, assess customer credit ratings, and establish customer credit records.

Article 16 The lender shall calculate its working capital requirements based on the borrower's operating scale, business characteristics, and accounts receivable, inventory, accounts payable, and capital cycle (refer to the annex for the calculation method), and consider the borrower's cash flow , Debt, repayment ability, guarantee and other factors, and reasonably determine the loan structure, including the amount, term, interest rate, guarantee and repayment method.

Article 17 Lenders shall establish standardized working capital loan review systems and procedures in accordance with the principles of loan review separation and hierarchical approval to ensure the independence of risk assessment and credit approval.

Lenders should establish and improve internal approval and sub-authorization mechanisms. The approver should approve the loan in accordance with the prescribed procedures within the scope of authorization, and must not approve the loan.

Chapter IV Contract Signing

Article 18 The lender shall sign a written loan contract and other relevant agreements with the borrower and other relevant parties, and those who require guarantee shall also sign a guarantee contract at the same time.

Article 19 The lender shall clearly agree with the borrower in the loan contract on the amount, term, interest rate, purpose, payment, and repayment method of the working capital loan.

Article 20 The payment terms referred to in the preceding article include but are not limited to the following:

(1) The method of payment of loan funds and the standard of the amount entrusted by the lender;

(2) Changes in payment methods and conditions for triggering changes;

(3) Restrictions and prohibitions on the payment of loan funds;

(4) The borrower shall provide the loan fund usage records and information in a timely manner.

Article 21 The lender shall agree in the loan contract that the borrower shall promise the following:

(1) Provide true, complete and effective materials to the lender;

(2) Cooperating with lenders for loan payment management, post-loan management and related inspections;

(3) Obtaining the consent of the lender before carrying out major investments such as foreign investment, substantial increase in debt financing, and merger, division, and equity transfer;

(4) The lender has the right to recover the loan in advance according to the withdrawal of the borrower's funds;

(5) Notifying the lender in a timely manner when a major adverse event affecting the ability to repay debts occurs.

Article 22 The lender and the borrower shall agree in the loan contract that the borrower shall bear the liability for breach of contract and the measures the lender may take when one of the following situations occurs:

(1) Failure to use the loan for the agreed purpose;

(2) Failure to pay loan funds in the agreed manner;

(3) Failure to keep promises;

(4) Breaking the agreed financial indicators;

(5) A major cross-default event has occurred;

(6) Other circumstances in violation of the loan contract.

Chapter V Distribution and Payment

Article 23 The lender shall establish an independent responsible department or post responsible for the review and approval of the issuance and payment of working capital loans.

Article 24 Before issuing a loan, the lender shall confirm that the borrower meets the withdrawal conditions stipulated in the contract, and manages and controls the payment of loan funds in accordance with the contract through the lender's entrusted payment or the borrower's independent payment. The loan funds are used according to the agreed purpose.

The lender's fiduciary payment means that the lender pays the loan through the borrower's account to the borrower's transaction object in accordance with the contract's purpose according to the borrower's withdrawal application and payment entrustment.

Borrower's independent payment means that after the lender releases the loan funds to the borrower's account in accordance with the borrower's withdrawal application, the borrower will pay to the borrower's transaction object that meets the purposes agreed in the contract.

Article 25 The lender shall reasonably agree on the method of payment of loan funds and the standard of the amount entrusted by the lender according to the borrower's industry characteristics, business scale, management level, credit status and other factors and types of loan business.

Article 26 In principle, a working capital loan in any of the following circumstances shall be adopted as the lender's entrusted payment method:

(1) Establishing a new credit business relationship with the borrower and the borrower's credit status is normal;

(2) The payment object is clear and the single payment is large;

(3) Other circumstances identified by the lender.

Article 27 In the case of entrusted payment by the lender, the lender shall, according to the agreed purpose of the loan, check whether the information on the payment object and payment amount provided in the payment application provided by the borrower is consistent with the corresponding business contract and other certification materials. After review and approval, the lender shall pay the loan funds to the borrower's counterparty through the borrower's account.

Article 28 In the case of borrower self-payment, the lender shall require the borrower to regularly report on the payment of loan funds in accordance with the contract stipulated in the loan, and verify whether the loan payment conforms to the agreed purpose through account analysis, voucher inspection or on-site investigation.

Article 29 In the process of loan payment, if the borrower's credit status declines, the main business's profitability is not strong, and abnormal use of loan funds occurs, the lender shall negotiate with the borrower to supplement the conditions for loan issuance and payment, or change according to the contract Loan payment methods, stop issuing and payment of loan funds.

Chapter VI Post-loan Management

Article 30 Lenders shall strengthen the management of loan funds after release, and analyze the borrower s operations, finance, credit, payment, guarantee, and financing through regular and irregular on-site inspections and off-site monitoring in accordance with the industry and operating characteristics of the borrower. Changes in the number and channels, and grasp various risk factors that affect the borrower's ability to pay debts.

Article 31 The lender shall, through the agreement of the loan contract, require the borrower to designate a special fund withdrawal account and provide the funds in and out of the account in a timely manner.

The lender can sign an account management agreement with the borrower in accordance with the borrower's credit status, financing situation, etc., and clearly stipulate the management of the withdrawal of funds from the designated account. ? Lenders should pay attention to the inflow and outflow of large amounts and abnormal funds, and strengthen the monitoring of funds withdrawal accounts.

Article 32 The lender shall dynamically pay attention to major early warning signals such as the borrower's operation, management, finance, and capital flow, and take effective measures such as early advance collection of loans and additional guarantees in accordance with the contract to prevent and resolve loan risks.

Article 33 The lender shall evaluate the degree of matching of loan types, quotas, maturities with the borrower's operating conditions and repayment ability as the basis for subsequent cooperation with the borrower, and timely adjust the strategy and content of cooperation with the borrower if necessary.

Article 34 Lenders shall, in accordance with the provisions of laws and regulations and the provisions of the loan contract, participate in the borrower's large-scale financing, asset sales and mergers, divisions, shareholding transformation, bankruptcy and liquidation, and other activities to safeguard the lender's creditor's rights.

Article 35 If a revolving fund loan requires renewal, the lender shall review the reasons for the change in the asset conversion cycle corresponding to the loan and the actual needs, decide whether to renew it, reasonably determine the renewal period of the loan, and strengthen the follow-up management of the renewal loan.

Article 36 If the liquidity loan is not well formed, the lender shall perform special management on it and formulate a collection and disposal plan in a timely manner. If the borrower is unable to repay the principal and interest of the loan on time due to temporary operating difficulties, the lender may negotiate with the borrower to restructure it.

Article 37 For non-performing loans that are truly uncollectible, after the lender has written off the loan in accordance with relevant regulations, it shall continue to seek recourse from the debtor or conduct market-oriented disposal.

Chapter VII Legal Liability

Article 38 If a lender runs a liquidity loan business in violation of the provisions of these Measures, the China Banking Regulatory Commission shall order it to make corrections within a time limit. In the case of a lender, the China Banking Regulatory Commission may adopt the supervisory measures stipulated in Article 37 of the Banking Regulatory Law of the People's Republic of China:

(1) The working process of the working capital loan is defective;

(2) Failure to implement the responsibilities of each link of loan management to specific departments and positions;

(3) Failure to perform due diligence on loan investigation, risk evaluation and post-lending management;

(4) The borrower's violation of the contract shall be discovered but not discovered, or the effective measures shall not be taken in time although found.

Article 39 In the case of a lender in one of the following circumstances, in addition to taking regulatory measures in accordance with Article 38 of these Measures, the China Banking Regulatory Commission may also implement Articles 6 and 48 punish them:

(1) Disbursing loans at reduced credit conditions or exceeding the actual funding needs of the borrower;

(2) Failure to sign a loan contract in accordance with these Measures;

(3) Cooperating with the borrower to issue loans in violation of regulations;

(4) Allowing the borrower to use the working capital loan for fixed asset investment, equity investment, and areas and uses for which production and operation are prohibited by the state;

(5) Examining or disguising loans beyond the authority in disguise;

(6) Failure to carry out loan fund payment management and control in accordance with the provisions of these Measures;

(7) Other situations that seriously violate the prudent operating rules provided for in these Measures.

Chapter VIII Supplementary Provisions

Article 40 Lenders shall formulate detailed implementation rules and operating procedures for the management of working capital loans in accordance with these Measures.

Article 41 The interpretation of these Measures shall be the responsibility of the China Banking Regulatory Commission. ?

Article 42 These Measures shall be implemented as of the date of promulgation. ?

Attachment: Calculation Reference of Demand for Working Capital Loans

3 attachments

"Calculation Reference for Demand for Working Capital Loans"

The demand for working capital loans should be determined based on the difference between the working capital required by the borrower's daily production and operation and the existing working capital (that is, the working capital gap). Generally speaking, the key factors affecting liquidity demand are inventory (raw materials, semi-finished products, finished products), cash, accounts receivable and accounts payable. At the same time, it will also be affected by important factors such as the industry to which the borrower belongs, the scale of operation, the stage of development, and the negotiating status. Banking financial institutions, based on the borrower's current financial report and business development forecasts, measure their liquidity loan demand in the following ways:

I. Estimate the amount of borrower's working capital

Factors affecting the borrower's working capital mainly include cash, inventory, accounts receivable, accounts payable, advance receipts, advance payments, etc. Based on the survey, predict changes in the turnover time of various funds, and reasonably estimate the amount of borrower's working capital. In actual calculation, the borrower's working capital requirements can refer to the following formula:

Amount of working capital = sales revenue for the previous year × (1-sales profit margin for the previous year) × (1 + estimated annual growth rate of sales revenue) / working capital turnover

Of which: working capital turnover times = 360 / (inventory turnover days + accounts receivable turnover days-accounts payable turnover days + prepaid accounts turnover days-advance accounts turnover days)

Turnover days = 360 / turnover times

Accounts receivable turnover times = sales revenue / average accounts receivable balance

Turnover of advance receipts = sales revenue / average advance receipt balance

Inventory turnover times = cost of sales / average inventory balance

Prepaid Account Turnover Times = Cost of Sales / Average Prepaid Account Balance

Accounts payable turnover times = cost of sales / average accounts payable balance

2. Estimate the amount of new working capital loans

Subtracting the estimated borrower's working capital requirements from the borrower's own funds, existing working capital loans, and other financing, the amount of new working capital loans can be estimated.

New amount of working capital loans = amount of working capital-borrower's own funds-existing working capital loans-working capital provided by other sources

Third, other factors to consider

(1) Each banking financial institution should reasonably predict the turnover days of borrowers' receivables, inventory and payables based on actual conditions and future developments (such as the industry, scale, development stage, negotiation status, etc. of the borrower) , And can consider a certain insurance factor.

(2) For group related customers, the consolidated financial statements can be used to estimate the working capital loan quota. In principle, the total working capital loans of member enterprises included in the scope of the consolidated financial statements cannot exceed the estimated value.

(3) For small business financing, order financing, prepaid rent or temporary large debt financing, etc., on the basis of the authenticity of the transaction, to ensure effective control of use and repayment, the amount of working capital can be determined based on actual transaction needs .

(4) For seasonal production borrowers, the continuous production period of each year can be used as the calculation period to estimate the working capital requirements, and the loan period should be reasonably determined according to the repayment period.