The State Financial Supervisory Administration issued the “Administrative Measures on M&A Loans of Commercial Banks”

The Zhitong Finance App learned that on December 31, the State Financial Supervisory Administration issued a notice to issue the “Administrative Measures on Commercial Bank M&A Loans”. The method mentions that a single merger and acquisition party that has obtained control of the target enterprise may apply for a controlled merger and acquisition loan in order to maintain or enhance control, but the share ratio of the target enterprise must not be less than 5% in a single acquisition. A shareholding merger and acquisition loan refers to a loan that supports a single merger and acquisition party to participate in a target enterprise, but has not achieved control over the target enterprise, but the share ratio of the target enterprise must not be less than 20% at a time. A single merger and acquisition party already holds 20% or more of the target company's shares. In order to further increase its shareholding ratio in the target enterprise, but no control has been achieved, it can apply for a shareholding type merger and acquisition loan, but the share ratio for a single transfer or subscription shall not be less than 5%.

At the same time, the merger and acquisition loan shall be used to replace the merger and acquisition price paid in advance by the merger and acquisition party, and shall not be used to replace the merger and acquisition loan already obtained. The interval between the initial withdrawal of a loan and the completion of payment of the full M&A transaction price to be replaced must not exceed one year. Commercial banks should strengthen the management of loan funds after disbursement, track the implementation of mergers and acquisitions in a timely manner, pay close attention to the implementation of key provisions in loan contracts, monitor risk factors affecting borrowers' ability to repay their debts, and strictly prevent acts such as misuse of borrowers' funds and related enterprises using false mergers and acquisitions to extract loan funds. If abnormalities are discovered, measures such as adding additional guarantees, adjusting loan issuance conditions or repayment plans, freezing or terminating credit lines, and early recovery of loans shall be taken promptly.

The original text is as follows:

Notice of the State Financial Supervisory Administration on Issuing the “Administrative Measures on M&A Loans of Commercial Banks”

Financial supervisory authorities, policy banks, large banks, joint stock banks, foreign banks:

The “Administrative Measures on Commercial Bank M&A Loans” are now being issued to you. Please follow them.

State Financial Supervisory Authority

December 31, 2025

(This letter is sent to the Financial Supervisory Authority, local legal banking institutions, foreign bank branches, enterprise group finance companies)

Commercial bank merger and acquisition loan management measures

Article 1 These Measures are formulated in accordance with laws and regulations such as the “Banking Supervision and Administration Law of the People's Republic of China” and “Commercial Banking Law of the People's Republic of China” in order to regulate the operation of mergers and acquisitions loans, improve the risk management capabilities of mergers and acquisitions loans, and strengthen support for economic restructuring and optimal allocation of resources.

Article 2 These Measures apply to commercial banks established by law within the People's Republic of China.

Article 3. A merger and acquisition loan referred to in these Measures refers to a loan issued by a commercial bank to a domestic merger and acquisition enterprise or its subsidiary to pay the price and expenses of a merger and acquisition transaction.

A subsidiary referred to in the preceding paragraph refers to a wholly-owned or holding subsidiary of the merger and acquisition party mainly engaged in investment management.

Article 4. M&A loans are used to support domestic merger and acquisition enterprises to achieve actual control, merger, or participation in target enterprises or assets that have already been established and continue to operate by transferring existing shares, subscribing for additional shares, purchasing assets, or undertaking debts. According to the purpose, it is divided into controlled M&A loans and equity participation M&A loans:

(1) Controlled merger and acquisition loans refer to loans that support a single merger and acquisition party or multiple M&A party enterprises with a concerted action relationship to obtain control of the target enterprise or assets.

A single merger and acquisition party that has obtained control of the target enterprise may apply for a controlled merger and acquisition loan in order to maintain or enhance control of the target enterprise, but the share ratio of the target enterprise obtained in a single time shall not be less than 5%.

(2) A shareholding merger and acquisition loan refers to a loan that supports a single merger and acquisition party to participate in a target enterprise, but has not achieved control over the target enterprise, but the share ratio of the target enterprise obtained in a single time must not be less than 20%.

A single merger and acquisition party already holds 20% or more of the target company's shares. In order to further increase its shareholding ratio in the target enterprise, but no control has been achieved, it can apply for a shareholding type merger and acquisition loan, but the share ratio for a single transfer or subscription must not be less than 5%.

Article 5 Commercial bank legal entities that set up merger and acquisition loan business shall meet the following conditions:

(1) Good business conditions and perfect corporate governance;

(2) Have a professional team engaged in merger and acquisition loan due diligence and risk assessment;

(3) The previous year's regulatory rating was good, and the main regulatory indicators met regulatory requirements;

(4) The balance of internal and external assets on the balance of the balance sheet is not less than 50 billion yuan after the consolidated statement was adjusted at the end of the previous year. Where a shareholding merger and acquisition loan business is carried out, the balance of assets inside and outside the balance of the balance sheet is not less than 100 billion yuan after the consolidated statement was adjusted at the end of the previous year.

Before setting up a merger and acquisition loan business, commercial banks shall establish corresponding business procedures and internal control systems, and file records with the State Administration of Financial Supervision and Administration or its dispatching agency.

Article 6 Commercial banks shall establish and improve M&A loan management mechanisms and information systems, formulate M&A loan management policies and procedures, and effectively identify, monitor, evaluate, mitigate and control M&A loan risks.

Article 7. Commercial banks shall follow the principles of compliance with the law, prudent operation, controllable risk, and commercial sustainability when starting a merger and acquisition loan business.

Article 8. M&A loan applications accepted by commercial banks shall meet the following basic conditions:

(1) The merger and acquisition parties operate in accordance with the law, have good credit conditions, have no records of evading bank debts, and have no bad records such as credit defaults in the past three years;

(2) The target enterprise or asset shall have good commercial value and be able to bring reasonable economic returns to the merger and acquisition party;

(3) There is a high degree of industrial correlation or strategic synergy between the merger and acquisition party and the target enterprise, which helps promote integration and restructuring, optimize the industrial layout, or transform and upgrade to a new quality of productivity;

(4) Where merger and acquisition transactions involve matters such as national industrial policy, industry entry, anti-monopoly, transfer of state-owned assets, etc., they shall obtain approval from relevant parties and carry out relevant formalities in accordance with relevant laws, regulations and policy requirements.

Article 9. The commercial bank's professional team responsible for merger and acquisition loan due diligence and risk assessment shall investigate, analyze and evaluate the contents of Articles 10 to 20 of these Measures, and form a written report.

The head of the professional team referred to in the preceding paragraph shall have at least three years of experience in mergers and acquisitions. The members include but are not limited to mergers and acquisitions experts, credit experts, industry experts, legal experts, and financial experts. The head of the dedicated M&A loan team should have at least five years of M&A experience.

Article 10 When carrying out due diligence investigations, commercial banks shall comprehensively cover the relevant circumstances of the merger and acquisition parties, including but not limited to the commercial value, potential return and valuation level of the target enterprise or assets, shareholder structure, corporate governance, business conditions, financial situation and overall credit of the merger and acquisition parties, and compliance with the merger and acquisition transactions. Where a guarantee is involved, the guarantor's ability to guarantee, the value of the pledge, etc. should be thoroughly investigated.

Article 11 Commercial banks shall carefully evaluate the risks of M&A loans on the basis of a comprehensive analysis of various risks related to mergers and acquisitions, such as strategic risks, legal and compliance risks, integration risks, operational and financial risks, etc., focusing on the borrower's solvency. At the same time, pay attention to the development prospects, synergy effects and operating efficiency of target enterprises after mergers and acquisitions, and comprehensively evaluate the impact on M&A loans. Where cross-border transactions are involved, country risk, exchange rate risk, capital transit risk, etc. should also be analyzed.

Article 12 When evaluating a borrower's solvency, commercial banks shall comprehensively consider various financial indicators, including but not limited to profitability, asset quality status, balance and liability structure, cash flow, etc.

Commercial banks should also analyze and evaluate the borrower's non-financial factors, including but not limited to the borrower's corporate governance, performance records, production equipment and technical capabilities, product and market, industry characteristics, and macroeconomic environment, etc., to ensure that borrowers have good repayment ability and willingness.

Article 13 When evaluating strategic risks, commercial banks shall analyze the business strategies, management teams, and synergy effects of the merger and acquisition parties, including but not limited to the following:

(1) The industrial correlation and strategic synergy between the mergers and acquisitions, as well as possible synergies, anticipated strategic results, and opportunities to obtain additional returns;

(ii) The possibility that the new management team will achieve new strategic goals after the merger and acquisition;

(3) Risk control measures or exit strategies that the merger and acquisition party may adopt when the synergy effect is not achieved.

Article 14 Commercial banks assess legal and compliance risks, including but not limited to the following:

(1) Whether the parties to the M&A transaction are qualified as subjects of the M&A transaction, whether they have obtained or are about to be approved in accordance with relevant regulations, and have carried out necessary procedures such as resolutions, registrations, announcements, etc., and whether the transaction is legal and valid;

(2) Whether the borrower's source of funds to pay the price of the merger and acquisition transaction and whether the control over the repayment cash flow is legal and compliant;

(3) Compliance with other aspects relating to merger and acquisition transactions, merger and acquisition financing legal structures and schemes.

Article 15. Commercial banks assess integration risks, including but not limited to analyzing whether mergers and acquisitions parties are capable of achieving synergy effects through the integration of the following aspects:

(1) integration of development strategies;

(2) Organization, human resources and cultural integration;

(3) business integration;

(4) Asset integration.

Article 16 Commercial banks assess operational and financial risks, including but not limited to the following:

(1) The main risks of enterprise operation after mergers and acquisitions, such as whether industry development and market share can maintain a stable or growing trend, whether corporate governance is effective, whether the management team is stable and has sufficient capacity, whether the technology is mature and can improve the competitiveness of the enterprise, and whether financial management is effective;

(2) The future cash flow of the merger and acquisition parties, its degree of stability, dividend strategy and its impact on M&A loan repayment;

(3) The risk that the M&A share (or asset) pricing is higher than the reasonable valuation of the target enterprise's equity (or assets).

Article 17 On the basis of a comprehensive analysis of the various risks associated with mergers and acquisitions, commercial banks shall establish a prudent financial model based on the operating and financial conditions of the merger and acquisition parties, the methods and amounts of mergers and acquisitions financing methods and amounts, etc., and measure the future financial data of the merger and acquisition parties, as well as key financial leverage and solvency indicators that have an important impact on the risk of mergers and acquisitions loans.

Article 18 Commercial banks shall conduct scenario analysis and stress tests on the basis of financial model calculation, and fully consider the impact of various adverse situations on the risk of mergers and acquisitions loans. Adverse circumstances include, but are not limited to:

(1) There have been unfavorable macroeconomic changes, concentrated defaults in the industry, and the credit ratings of both mergers and acquisitions have declined;

(2) The merger and acquisition parties' operating performance (including cash flow) did not maintain a stable or upward trend during the repayment period;

(3) After the merger and acquisition, the merger and acquisition party and the target enterprise failed to produce a synergy effect.

Article 19 Where there is a relationship between the merger and acquisition party and the target enterprise, commercial banks shall strengthen pre-loan investigations, understand and grasp relevant circumstances such as the economic motives of the merger and acquisition transaction, the feasibility of merger and acquisition integration, and the possibility of forming a synergy effect, verify the authenticity of the merger and acquisition transaction and the reasonable price of the merger and acquisition transaction, and prevent related enterprises from using false merger and acquisition transactions to extract bank credit funds.

Article 20 In principle, commercial banks shall require borrowers to provide guarantees that cover the risks of merger and acquisition loans, including but not limited to asset collateral and equity pledges, as well as other forms of guarantees that meet the requirements of the law. When pledging shares in target enterprises, commercial banks should use more prudent methods to evaluate their equity value and determine the pledge rate.

Article 21 Commercial banks shall fully carry out due diligence and risk assessments, confirm the authenticity of merger and acquisition transactions and the rationality of applying for merger and acquisition loans, comprehensively judge the borrower's ability to repay and the profitability of the enterprise after the merger and acquisition, and form loan approval opinions.

Article 22 Commercial banks shall, on the basis of risk assessment results of mergers and acquisitions loans, comprehensively consider service costs and benefits, and reasonably determine the contents of basic clauses such as loan amounts, terms, interest rates, installment repayment plans, and guarantee methods in the loan contract.

Article 23 Commercial banks shall agree on key provisions to protect their own interests in loan contracts, including but not limited to the following:

(1) The borrower is obligated to regularly submit the financial statements of the merger and acquisition parties, the guarantors and other information required by the commercial bank, and to continuously meet the binding terms of the commercial bank on the borrower's important financial indicators;

(2) Commercial banks have the right to know or approve major changes in matters involving the equity, operation, finance, investment and financing of the parties involved in the merger and acquisition, and have the right to take risk control measures against major adverse changes;

(3) M&A loan withdrawal conditions and use of funds, and measures such as account monitoring and document collection necessary to ensure that commercial banks monitor the flow of funds.

Article 24 Commercial banks shall comprehensively consider the risks of merger and acquisition transactions and merger and acquisition loans, carefully determine the ratio of merger and acquisition loans to the price of merger and acquisition transactions, ensure that the merger and acquisition capital contains a reasonable proportion of equity capital, and prevent the risk of highly leveraged merger and acquisition financing.

Controlled M&A loans shall account for no more than 70% of the M&A transaction price, and equity capital shall account for no less than 30% of the M&A transaction price.

Share-based M&A loans shall account for no more than 60% of the M&A transaction price, and equity capital shall account for no less than 40% of the M&A transaction price.

Article 25 In principle, the term of a controlled merger and acquisition loan shall not exceed ten years, and in principle, the term of a shareholding merger and acquisition loan shall not exceed seven years.

Article 26 Before issuing a loan, a commercial bank shall confirm that the borrower satisfies the withdrawal conditions agreed in the contract. Withdrawal conditions shall include at least that the M&A transaction funds other than the M&A loan have been paid in full according to the agreed schedule, and that the M&A transaction compliance requirements have been met.

Where a borrower applies for a merger and acquisition loan to pay the price of a merger and acquisition transaction, in principle, a fiduciary payment method shall be used; where it is indeed impossible to use the fiduciary payment method, necessary measures shall be taken to ensure that the use of funds is legal and compliant.

Article 27. A merger and acquisition loan shall be used to replace the merger and acquisition price paid in advance by the merger and acquisition party, and shall not be used to replace the merger and acquisition loan already obtained. The interval between the initial withdrawal of a loan and the completion of payment of the full M&A transaction price to be replaced must not exceed one year.

Article 28 Commercial banks shall strengthen the management of loan funds after disbursement, promptly follow up the implementation of mergers and acquisitions, closely monitor the implementation of key provisions in loan contracts, monitor risk factors affecting borrowers' ability to repay their debts, and strictly prevent acts such as misuse of borrowers' funds and related enterprises using false mergers and acquisitions to extract loan funds. If abnormalities are discovered, measures such as adding additional guarantees, adjusting loan issuance conditions or repayment plans, freezing or terminating credit lines, and early recovery of loans shall be taken promptly.

Article 29. The balance of merger and acquisition loans of commercial banks to a single borrower shall not exceed 2.5% of the Bank's net Tier 1 capital during the same period.

The balance of all merger and acquisition loans of commercial banks shall not exceed 50% of the Bank's net Tier 1 capital during the same period.

The balance of equity M&A loans shall not exceed 30% of the Bank's total M&A loan balance.

Article 30. In accordance with the Bank's M&A loan business development strategy, commercial banks shall establish a corresponding limit control system for the concentration of M&A loans by a single borrower, group customer, industry category, country or region.

Commercial banks can take the form of syndicated loans to control customer concentration and spread risk reasonably.

Article 31 The State Financial Supervisory Administration and its dispatched agencies may put forward prudential supervision requirements for the management of merger and acquisition loans of commercial banks based on the operation and management situation, risk level, and development of merger and acquisition loan business of commercial banks.

If it is discovered that a commercial bank does not meet the requirements for starting a business or violates the relevant provisions of these Measures and is unable to effectively control the risk of mergers and acquisitions loans, the State Financial Supervisory Administration and its dispatching agencies may take supervisory measures or implement administrative penalties in accordance with relevant laws and regulations.

Article 32 Where policy banks, foreign bank branches, and enterprise group finance companies set up mergers and acquisitions loan business, they shall be implemented with reference to these Measures.

Article 33 These Measures shall be interpreted by the State Administration of Financial Supervision and Administration.

Article 34. These Measures take effect from the date of publication. The “Notice of the China Banking Regulatory Commission on Issuing the 'Risk Management Guidelines for Commercial Banks' M&A Loans” (Banking Regulatory Commission (2015) No. 5) was also abolished.

This article was selected from the official website of the “China Financial Supervisory Administration”. Zhitong Finance Editor: Liu Jiayin.