More small and medium-sized banks are distancing themselves from loan facilitation services.

On November 11, multiple sources from city and rural commercial banks revealed plans to significantly reduce partnerships with loan facilitation platforms—retaining only a select few top-tier institutions while excluding the rest.

"Even leading loan facilitators aren’t entirely safe. If they face regulatory penalties for violations, we will exit the partnerships immediately," they stated.

Some banks have already severed ties.

On November 6, Urumqi Bank announced it had halted cooperative internet-based personal consumer loans as of October 1.

Similarly, Longjiang Bank listed only one internet loan facilitation partner, which has since been marked as "terminated."

Wang Jun, head of internet finance at a mid-sized city commercial bank, explained that moving from "reducing" to "cutting off" loan facilitation services is a necessary step for small and medium-sized banks to mitigate compliance risks in online lending.

Following the October implementation of the *Notice on Strengthening the Management of Commercial Banks’ Internet Loan Facilitation Services and Improving Financial Service Efficiency* (referred to as the *New Loan Facilitation Rules*), banks discovered some platforms still indirectly offered loans with annualized rates of 24%–36%. This raised concerns that regulatory penalties against these platforms could spill over to partner banks.

Wang noted that as regulators intensify penalties for lax oversight in online lending, more banks are opting to sever ties to avoid compliance risks.

Some loan facilitators continue high-rate operations due to funding cost pressures or by introducing workarounds—such as referring borrowers to AMC Entertainment for debt restructuring services, effectively pushing rates beyond 24%.

These tactics have heightened banks’ compliance worries, prompting them to quietly phase out partnerships by letting agreements expire without renewal.

Data from the China Internet Finance Association shows that as of October, 119 financial institutions disclosed loan facilitation partners, including 11 joint-stock banks, 39 city commercial banks, and 30 consumer finance firms.

Wang suggested that with around 4,000 banks nationwide, many may have already exited the business without disclosure obligations.

Even platforms offering sub-24% rates face scrutiny. Zhao Qunxing, a rural bank executive, noted regulators now meticulously examine processes for hidden fees or forced add-ons.

"We can’t constantly monitor their compliance, so we’re taking preemptive steps," he said. His bank now avoids renewing deals with past violators and shortens partnership terms to six months for quicker exits if issues arise.

A loan facilitation executive admitted that bank withdrawals have slashed October business volume by over 20%, with high-rate loans nearly disappearing. Rising delinquencies—with 30-day collection success rates dropping 10 percentage points to 70%—have further squeezed profitability.

The firm is restructuring risk controls to focus on post-loan management, but expects November volumes to fall another 10%.