XW Bank

History

2021: Giant interest on loans

In mid-March 2021, it became known that XW Bank, one of three Chinese online banks of Xiaomi Corporation, charges an interest rate of up to 30% on consumer loans on the automatic financing platform and does not comply with the rules for risk assessment and debt collection.

XW Bank was founded in 2016, and its main shareholders are the New Hope Group holding, which owns a 30% stake, and Xiaomi Corporation, which got a 29.5% stake. As of the end of 2019, the assets of the online bank were estimated at $6.8 trillion.

Xiaomi Digital Bank, XW Bank, found in giant interest on loans

The Chinese Banking and Insurance Regulatory Commission (CBIRC) accused the online bank of "violating legitimate consumer rights and interests." According to the regulator, since the end of 2019, the number of consumer complaints against the lender has increased significantly, which required immediate action. Although the CBIRC did not punish XW Bank with any sanctions, the Commission emphasized that all banks and insurers should protect consumer rights and independently monitor compliance with laws in collaboration with third-party online platforms.

Most of the customer complaints related to high interest rates on an unnamed car lending platform with which XW Bank cooperates. If the annual interest rate on loans in XW Bank is from 7.7% to 8.9%, then the rate on the online platform in some cases exceeded 30%.

The warning issued by the online bank was another step by China in combating monopolistic practices and the dependence of the country's financial system on technology companies. Among other things, the Chinese government plans to establish special supervision of fintech companies, and the CBIRC has published draft new rules for microcredits, prohibiting local online lenders from providing loans to college students. The regulator believes that this group of borrowers is subject to extremely high risks.^[1]

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