Banks elucidate costs of financing

A number of small and medium-sized banks in China issued announcements in May, stating that they are implementing policies requiring the disclosure of the comprehensive financing costs of corporate loans. Analysts said this is not merely an information disclosure requirement, but also an institutional tool aimed at lowering financing costs for the real economy, strengthening financial consumer protection and regulating order in the credit market.

Earlier this month, Sichuan Longchang Rural Commercial Bank announced that starting from May 20, customers applying offline for newly contracted loans would be required, before loan disbursement, to sign a comprehensive financing cost disclosure form for corporate loans or personal loans. The form details loan interest rates and all non-interest expenses, helping customers fully understand the total cost of obtaining a loan.

A sample form released by Tianjin Rural Commercial Bank on May 15 showed that the cost list includes bank interest rates, details of other financing costs and the enterprise's total financing cost. The details of other financing costs include guarantee fees, appraisal fees, collateral or mortgage registration fees, collateral monitoring fees, trade financing service charges and intermediary service fees.

In the China monetary policy implementation report for the first quarter of 2026, the People's Bank of China, the country's central bank, said that it would continue to deepen efforts to disclose the comprehensive financing costs of corporate loans.

Yang Haiping, a researcher at the Shanghai-based SIFL Institute, said that promoting disclosure of comprehensive financing costs helps improve transparency, reduce room for regulatory violations, eliminate hidden charges and enhance the standardization of financial services.

In March, Haizhixin (Shandong) New Materials Co urgently needed 4 million yuan ($590,800) to expand production. Zhang Wei, the company's legal representative, found a loan broker online that claimed to have "internal bank connections". The broker promised loan disbursement within three days but demanded a 3 percent service fee.

Before Zhang signed the contract, an account manager from Agricultural Bank of China paid him a visit, showed him a breakdown of the comprehensive financing costs for corporate loans, and explained that banks do not charge such intermediary fees when issuing loans. This helped him better understand the costs involved and showed him the proper way to obtain a loan.

Improving financing cost transparency will also push banks to reduce operating costs and enhance competitiveness, said Yang at the SIFL Institute.

In addition, the National Financial Regulatory Administration and the PBOC jointly issued regulations in March requiring lenders to disclose comprehensive financing costs to personal loan borrowers. The rules will take effect on Aug 1.

Dong Ximiao, deputy director of the Shanghai Institution for Finance and Development, said that although loan interest rates have declined significantly in recent years, some personal loans, especially those offered through partnerships between financial institutions and loan facilitation platforms or offered by internet platforms, still involve non-interest costs. These costs are charged by multiple entities under numerous fee categories that lack transparency, leaving financing costs for some personal loans relatively high.

However, as the various costs along the lending chain become transparent, the room for unscrupulous loan brokers to profit from information asymmetry by imposing additional charges will be greatly reduced. In the long run, this will promote healthier development of the financial system and push financial institutions to shift from competing through channels to competing through service quality, Dong said.

jiangxueqing@chinadaily.com.cn