CCB streamlines loan approval process with new ratings technique for companies

Large State-owned commercial banks have ramped up support for private and small businesses after government officials urged financial institutions to address financing difficulties of these enterprises.

China Construction Bank Corp, the second largest State-owned commercial lender in terms of assets, has been using financial technologies to help small businesses obtain loans more easily, while it is stepping up efforts to control lending risks effectively, said CCB executives.

The bank has introduced 26 types of external data, such as data from taxation, customs, and industry and commerce administrations, to its data warehouse. After it has added up and cross-checked various types of information, the bank will create a profile for each corporate client and select those with a good track record for an automated loan approval process, based on its own ratings model, said Zhang Weizhong, general manager of the financial inclusion department of China Construction Bank.

"Traditionally, we assessed companies on the basis of their financial reports. Whether or not the information provided in the reports was true, comprehensive and up-to-date greatly affected our judgment on the business conditions of a company.

"While doing due diligence offline, we found that banks are very inefficient in terms of loan approvals. In the past, it took 20 to 30 days on average for CCB to approve a company's loan application. But now, the situation has changed, as we are applying big data to our financial services," he said at a news conference in Beijing last week.

As of the end of September, CCB's balance of loans to small and micro enterprises was 1.49 trillion yuan ($214 billion). The number of its small corporate clients increased by 44 percent from the beginning of this year to 874,000. Its new loans related to financial inclusion reached 160 billion yuan and are expected to exceed 200 billion yuan within this year.

The bank has also realized the importance of smart risk management, according to Zhang Gengsheng, vice-president of CCB.

"We embedded our risk control baseline and standards in the new generation of our core banking system and built a mechanism which runs through the whole process of risk control, using big data to select clients, check risks, and give early warnings on risks," he said.

CCB issued guidelines to increase support for private and small businesses following the call of government officials to address the financing woes of these companies.

Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, said in an interview with Financial News on Nov 7, "For large banks, their loans to private companies should account for no less than one-third of their new corporate loans. For small and medium-sized banks, the proportion should be no less than two-thirds. Banking institutions altogether should try to attain the goal of granting no less than 50 percent of their total new corporate loans to private companies in three years."

Just like CCB, other large State-owned commercial banks also took similar action. Agricultural Bank of China Ltd launched a set of measures on Nov 12 to strengthen support for the healthy development of private enterprises. The measures include increasing loans to private businesses, expanding their financing channels, innovating financial products and service models, and lowering service costs.