① The level of risk control and due diligence are still the focus of institutional attention. Furthermore, along with the continuous improvement of financial insurance mechanisms, financial insurance related irregularities have also become a “red line” for institutions to pay special attention to. ② As the country introduces various supporting and guiding policies for NEVs, the NEV loan business may become a new transformation and development opportunity for auto finance companies.
Financial Services Association, December 19 (Reporter Gao Ping) Auto finance companies have been fined one more case. According to the latest information from the Shaanxi Regulatory Bureau of the State Administration of Financial Supervision and Administration, BYD Auto Finance received a fine. Taken together, since 2024, a total of 3 auto finance companies have received fines, totaling 1.5 million yuan. Most of the fines involved irregularities in the business sector.
Judging from the data, whether it is the number of auto finance companies that have been fined or the amount of fines, the number of fines since this year has exceeded that of last year. Industry insiders told the Financial Federation reporter that supervision in the auto finance sector is under pressure. As the auto finance market continues to develop and the scale and complexity of the business continues to increase, regulators will continue to strengthen supervision to maintain the stability and order of the financial market.
BYD Auto Finance was fined about 29.2 billion yuan for company-related transactions in 2023 due to inadequate management of related transactions
According to information disclosed by the Supervisory Authority on December 18, BYD Auto Finance was fined 0.3 million yuan by the Shaanxi Regulatory Bureau of the State Administration of Financial Supervision and Administration. The main offense was inadequate management of related transactions.
Su Xiaorui, a senior researcher at Suxi Zhi Research, said in an interview with a reporter from the Financial Association that generally speaking, the management of related transactions is inadequate or involves violation of the relevant prohibitions on related transactions, and may also result in violations in terms of reporting, disclosure, etc. This lack of proper management may affect the independence of the organization's operations. Furthermore, some “unfair and unreasonable related transactions” may also be suspected of infringing on the rights and interests of other business entities in the market.
According to data, BYD Auto Finance was approved for construction in August 2014 and formally established in February 2015. According to the equity structure, BYD Auto Finance was jointly funded by BYD Co., Ltd., Bank of Xi'an, and BYD Precision Manufacturing Co., Ltd., with a registered capital of 10 billion yuan. Among them, BYD directly holds 77% of the shares, Bank of Xi'an holds 20% of the shares, and BYD Precision Manufacturing Co., Ltd. holds 3% of the shares.
According to the relevant announcement disclosed on the official website of BYD Auto Finance, BYD Auto Finance cannot be exempted from disclosing related transactions totaling about 29.2 billion yuan in 2023, of which related transactions based on capital were 29.106 billion yuan. In addition, the amounts of related transactions that cannot be exempted from disclosure for the first quarter, second quarter, and third quarter of 2024 were 0 billion yuan, 2 billion yuan, and 10.2 billion yuan, respectively. The types of transactions were all related transactions based on capital.
On April 15 of this year, BYD Auto Finance issued 26 major related transaction information announcements in one go, mostly involving transactions related to BYD. It mainly provides guarantee services for BYD to provide guarantee services for the company's interbank loan business and charges guarantee service fees according to the actual amount of the guarantee. The company and the bank carry out interbank loan business, and the shareholder BYD guarantees the company's bank loans according to the investment ratio in response to the bank's credit requirements. As required, the company provided a counterguarantee to BYD. Most of the related transactions involved in the announcement alone were hundreds of millions of yuan.
According to BYD Auto Finance, the company will mainly involve three types of related transactions in 2023: asset-based, capital-based, and intermediary service-based. Major related transactions involve guarantee fees and counterguarantees relating to the related party BYD. The unified transaction agreement involves shareholder deposits with the related party BYD Co., Ltd. and information service fees with the related party BYD Auto Sales Co., Ltd.; the rest are general related transactions.
Auto finance companies were fined a total of 1.5 million yuan during the year. Institutions need to focus on risk control and due diligence
Judging from the auto finance companies that have been fined since this year, two other companies were also fined before that, mostly involving business irregularities. Among them, Changan Auto Finance was fined 0.9 million yuan in September. The facts involved included careless review of additional loan issuance; infringing on financial consumers' right to make independent choices; handing over their own risk control costs to customers in violation of regulations; and inadequate risk management in the used car business. SAIC-GM Finance was fined 0.3 million in September, involving careless pre-loan investigations involving some retail auto loan businesses.
“Judging from the data, it is characterized by a variety of business violations, covering various business aspects such as loan issuance review, consumer rights protection, risk management, etc., involving all aspects of the business process.” Regarding the situation of auto finance companies that were fined this year, Wang Pengbo, chief analyst in the financial industry at Broadcom Consulting, said that the audit and risk management of the loan business has always been a high-incidence area, which can easily lead to financial risks, such as rising non-performing loan rates. It is recommended that auto finance companies establish and improve internal compliance management systems, and clarify operating standards and risk prevention and control points for each business link.
In an interview with a reporter from the Financial Services Association, Su Xiaorui said that judging from the reasons auto finance companies were fined this year, the level of risk control and due diligence are still the focus of institutional attention. Furthermore, along with the continuous improvement of financial consumer insurance mechanisms, financial consumer insurance related violations have also become a “red line” for institutions to pay special attention to.
Statistics show that a total of 2 auto finance companies were fined last year, totaling 1 million yuan. The reasons for the penalties involved serious violation of prudential management rules or serious violation of prudential management rules by internal control when carrying out retail loan business. Since this year, up to now, 3 companies have been fined, totaling 1.5 million yuan.
Wang Pengbo said bluntly that judging from the trend, stricter regulations are an inevitable trend. With the continuous development of the auto finance market, the expansion of the scale of business and the increase in business complexity, regulators are strengthening supervision to maintain the stability and order of the financial market. Su Xiaorui also said that judging from the quantity and amount of money, supervision in the auto finance sector is in a high-pressure situation. Auto finance companies need to learn from the experience and lessons of their peers, improve internal control mechanisms at the source, and continuously investigate and fill gaps in compliance shortcomings.
According to the “China Auto Finance Company Industry Development Report (2023-2024)” issued by the China Banking Association, by the end of 2023, the assets of 25 auto finance companies across the country reached 964.818 billion yuan, and overall remained stable. In addition, the balance of NEV loans was 165.334 billion yuan, up 61.25% year over year.
According to the Joint Credit Finance Rating Agency, as the market saturation of auto finance increases, competitive pressure from commercial banks and other industry participants increases, and market competition within the industry may intensify. In particular, the development of branded auto finance companies with poor sales is facing great challenges. And as the country introduces various supporting and guiding policies for NEVs, the NEV loan business may become a new transformation and development opportunity for auto finance companies.