To promote the development of inclusive finance while guarding against financing risks, the State Council issued a circular to tighten supervision over financing guarantee companies.

According to the circular, regulatory authorities determined by governments of provinces, autonomous regions and municipalities are responsible for the supervisory work within the region.

Local governments are urged to formulate their specific policies and measures in promoting the development of financing guarantee industry, and dispose of the risks of financing guarantee companies.

The State Council also decided to establish an inter-ministerial joint meeting to oversee the financing guarantee business nationwide, including establishing a supervisory management system and guiding local governments to conduct supervision.

The establishment of new financing guarantee companies should be approved by supervisory authorities, and the terms of “financing guarantee” should be included in company names.

In addition, its establishment should be in accordance with the Company Law and must meet certain conditions, such as the good reputation of shareholders and registered capital of no less than 20 million yuan ($3 million).

The setting up of cross-region branches of financing guarantee companies should meet such conditions as registered capital of no less than 1 billion yuan, operation of financing guarantee business for more than three years and no record of major violations of laws or regulations in the past two years.

As for operational rules, financing guarantee companies that are under stable operation and in good financial condition are allowed to embark on non-financing guarantee business, such as the guarantee of property preservation under a lawsuit.

Financing guarantee companies are also urged to improve business norms in terms of financing guarantee project assessment and post-guarantee management, as well as an internal control system, such as risk management.

Financing guarantee companies are forbidden to engage in certain activities, such as accepting money deposits in any form, a self-operated loan or an entrusted-loan, and entrusted-investment.

The circular also urged supervisory departments to improve their supervision system, making use of modern information technology to conduct real-time risk monitoring, and reinforcing off-site and on-site inspection of financing guarantee companies.

Classified supervision should be conducted in accordance with the operational scale, management level and risk condition of financing guarantee companies.

Supervisory departments also are called on to improve the credit record system of financing guarantee companies, which will be included on the national information platform of credit records.

Unlicensed financing guarantee enterprises or financing guarantee businesses will be banned or ordered to stop operation; unauthorized merger or division of financing guarantee enterprises, cutting registered capital or setting up of branches across provinces, autonomous regions, and municipalities will be ordered to make corrections in limited periods.

Industry associations should play a role in coordinating and guiding financing guarantee enterprises to conduct a law-based operation and fair competition.

To promote employment and entrepreneurship, government departments are allowed to directly establish operational institutions to conduct financing guarantee business in accordance with related rules and regulations.