Instead of collecting income proof assessing creditworthiness, banks may use big data and other fintech.
The Hong Kong Monetary Authority (HKMA) issued new guidelines for how banks can use fintech in their personal lending business.
The new guidelines allows banks to carve out a limited portion of their personal lending portfolio to be tagged as “New Personal Lending Portfolio” that should not exceed 10% of their capital base, according to a government release. The portfolio will not be required to follow conventional lending practices. This means that instead of the traditional method of demanding proof of income from the borrower, banks may adopt technology-powered credit risk management technologies like big data and consumer behavioural analytics to assess credit risks.
“The new guidelines will enable banks to be more innovative and adopt more financial technology in personal lending business in order to improve digital customer experience. This is also a major development in banking supervision,” said Mr Arthur Yuen, deputy chief executive of the HKMA.
HKMA urges banks to perform responsible lending and inform their customers about the features and obligations of the key product when applying technology-driven credit risk management techniques.
The move is part of HKMA’s concerted effort to promote smart banking in Hong Kong under the Banking Made Easy initiative.
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