China Banking and Insurance Regulatory Commission issues new measures for commercial bank M&A loans expanding scope and easing key terms

The China Banking and Insurance Regulatory Commission has issued the Measures for the Administration of Commercial Bank Mergers and Acquisitions Loans, revising its 2015 risk management guideline and updating the supervisory framework for banks’ M&A lending. The measures broaden the product’s permitted use beyond controlling acquisitions to also allow M&A loans for certain qualifying minority-stake transactions. They also introduce differentiated eligibility requirements for banks conducting controlling versus minority-stake M&A lending, combining baseline expectations such as strong supervisory ratings and compliance with key prudential indicators with different asset-size requirements. On loan terms, the measures raise the maximum share of an acquisition price that can be financed with an M&A loan and extend the maximum loan tenor, while strengthening expectations that banks prioritise assessment of the acquirer’s debt-servicing capacity and take into account post-acquisition prospects, synergies and operating performance in their credit analysis. The regulator will guide commercial banks on implementation of the measures.