The China Banking and Insurance Regulatory Commission issued the "Measures for the Management of Mergers and Acquisitions Loans of Commercial Banks".

On December 31st, the China Banking Regulatory Commission issued a notice on the issuance of the "Commercial Bank Merger Loan Management Measures." The measures mention that a single acquiring party that has obtained control of the target company and acquires or subscribes to the shares of the target company to maintain or enhance control, may apply for a control-type merger loan, but the proportion of shares acquired in a single transaction must not be less than 5%. A stake-type merger loan refers to the support provided to a single acquiring party to invest in the target company without achieving control, but the proportion of shares acquired in a single transaction must not be less than 20%. If a single acquiring party already holds 20% or more of the target company's shares and seeks to further increase the stake in the target company without achieving control, a stake-type merger loan may be applied for, but the proportion of shares acquired in a single transaction must not be less than 5%. At the same time, merger loans used to replace the upfront payment of the merger price by the acquiring party must meet the requirements of this method regarding the minimum proportion of equity capital and may not be used to replace already obtained merger loans. The time of the first loan withdrawal and the completion of the full payment of the merger transaction price to be replaced should not exceed one year. Commercial banks should strengthen the management of loan funds after disbursement, track the implementation of mergers in a timely manner, closely monitor the fulfillment of key terms in loan contracts, monitor risk factors affecting the borrower's debt repayment ability, prevent fund embezzlement by the borrower or affiliated entities using false merger transactions to obtain loan funds, etc. If any irregularities are found, timely measures such as increasing guarantees, adjusting loan disbursement conditions or repayment plans, freezing or terminating credit limits, or early loan repayment should be taken. The original text is as follows: Notice from the China Banking Regulatory Commission on the Issuance of the "Commercial Bank Merger Loan Management Measures" All financial regulatory authorities, policy banks, large commercial banks, joint-stock banks, and foreign banks: The "Commercial Bank Merger Loan Management Measures" are hereby issued to you for implementation. China Banking Regulatory Commission December 31, 2025 (This document is sent to financial regulatory sub-bureaus, domestic legal person banking institutions, foreign bank branches, and enterprise group finance companies) Commercial Bank Merger Loan Management Measures Article 1 In order to standardize the business operations of commercial banks in merger loans, enhance the risk management capabilities of merger loans, and strengthen support for economic restructuring and resource optimization, these measures are formulated in accordance with the "People's Republic of China Banking Supervision and Management Law" and the "People's Republic of China Commercial Bank Law," and other laws and regulations. Article 2 These Measures apply to commercial banks established in the People's Republic of China according to law. Article 3 The term "merger loan" as used in these Measures refers to loans granted by commercial banks to domestic acquiring party enterprises or their subsidiaries for the purpose of paying merger transaction prices and expenses. The term "subsidiaries" as mentioned in the preceding paragraph refers to wholly-owned or controlling subsidiaries of the acquiring party primarily engaged in investment management. Article 4 Merger loans are used to support domestic acquiring parties in obtaining control, mergers, or participation in established and continuously operating target enterprises or assets through methods such as acquiring existing equity, subscribing for new equity, acquiring assets, or taking over debt. According to their use, they are divided into control-type merger loans and stake-type merger loans: (1) Control-type merger loan refers to loans that support single acquiring parties or multiple acquiring parties with consistent action to obtain control of the target company or asset. A single acquiring party that has obtained control of the target company and acquires or subscribes to the shares of the target company to maintain or enhance control may apply for a control-type merger loan, but the proportion of shares acquired in a single transaction must not be less than 5%. (2) Stake-type merger loan refers to loans that support single acquiring parties to invest in the target company without achieving control, but the proportion of shares acquired in a single transaction must not be less than 20%. If a single acquiring party already holds 20% or more of the target company's shares and seeks to increase the stake in the target company without achieving control further, a stake-type merger loan may be applied for, but the proportion of shares acquired in a single transaction must not be less than 5%. Article 5 Commercial bank legal entities engaged in merger loan business should meet the following conditions: (1) Good operating conditions and sound corporate governance; (2) A professional team capable of conducting due diligence and risk assessment for merger loans; (3) Good supervision rating in the previous year, with major regulatory indicators meeting regulatory requirements; (4) As for commercial banks engaged in stake-type merger loan business, the total assets in and outside the balance sheet at the end of the previous year, adjusted according to the consolidated statement method, should not be less than 100 billion Chinese Yuan. Before commencing the merger loan business, commercial banks should establish corresponding business processes and internal control systems and file them with the China Banking Regulatory Commission or its dispatched agencies. Article 6 Commercial banks should establish a sound merger loan management mechanism and information system, formulate merger loan management policies and procedures, effectively identify, monitor, evaluate, mitigate, and control merger loan risks. Article 7 Commercial banks engaging in merger loan business should follow the principles of legality, prudence, risk control, and commercial sustainability. Article 8 The merger loan applications accepted by commercial banks should meet the following basic conditions: (1) The acquiring party operates legally and compliantly, has a good credit standing, no record of absconding from bank debts, and no bad records such as credit defaults in the past three years; (2) The target company or asset should have good commercial value and be able to bring reasonable economic returns to the acquiring party; (3) There should be high industrial relevance or strategic synergy between the acquiring party and the target company, contributing to integration and restructuring, optimizing industrial layout, or transforming towards new and high-quality productivity; (4) Matters related to national industrial policies, industry access, anti-monopoly, and state-owned asset transfers involved in the merger transaction should obtain approvals from relevant authorities and fulfill necessary procedures in accordance with relevant laws, regulations, and policies. Article 9 The professional team responsible for due diligence and risk assessment of merger loans in commercial banks should investigate, analyze, and assess the contents of Articles 10 to 20 of these measures and produce a written report. The head of the professional team referred to in the preceding paragraph should have more than three years of experience in merger transactions, including but not limited to merger experts, credit experts, industry experts, legal experts, and financial experts. The head of the professional team for stake-type merger loans should have more than five years of experience in merger transactions. Article 10 Commercial banks should conduct due diligence comprehensively, covering relevant information about both the acquiring and target companies, including but not limited to the commercial value, potential returns and valuation levels of the target company or asset, the shareholder structure, corporate governance, operational status, financial situation, overall creditworthiness of both sides, compliance of the merger transaction, etc. If there are guarantees involved, a comprehensive investigation on the guarantor's guarantee ability, collateral value, etc. should be conducted. Article 11 Commercial banks should analyze strategic risks, legal and compliance risks, integration risks, operational and financial risks related to mergers comprehensively. Based on this analysis, they should evaluate the risks of merger loans prudently, focusing on assessing the borrower's debt repayment capacity, while also considering the future development prospects, synergies, and operational benefits of the target company after the merger, and comprehensively assess the impact on merger loans. In cases involving cross-border transactions, country risks, exchange rate risks, and fund transfer risks should also be analyzed. Article 12 Commercial banks should evaluate the borrower's debt repayment capacity by comprehensively considering various financial indicators, including but not limited to profitability, asset quality, asset-liability structure, cash flow, etc. Commercial banks should also analyze and evaluate non-financial factors of the borrower, including but not limited to corporate governance, performance record, production equipment and technological capability, products, market, industry characteristics, and macroeconomic environment, to ensure that the borrower has the ability and willingness to repay. Article 13 When assessing strategic risks, commercial banks should analyze aspects such as the operational strategy, management team, and synergies of the acquiring parties comprehensively, including but not limited to the following: (1) Industrial relevance and strategic synergy of the acquiring parties, potential synergies, expected strategic benefits, and opportunities for additional returns; (2) The likelihood of the new management team achieving new strategic goals post-merger; (3) Risk control measures or exit strategies the acquiring party may take if synergies are not achieved. Article 14 Commercial banks should assess legal and compliance risks comprehensively, including but not limited to the following: (1) Whether all parties involved in the merger transaction have the qualifications as merger transaction entities, whether necessary approvals have been obtained according to regulations, and whether necessary resolutions, registrations, announcements, etc. have been or will be made, and whether the transaction is legal and effective; (2) The source of funds for the borrower to pay the merger transaction price, whether the control of repayment cash flows is legal and compliant; (3) The compliance of other aspects related to legal structure and schemes of the merger transaction and merger financing. Article 15 Commercial banks should assess integration risks, including but not limited to analyzing whether the acquiring parties have the capabilities to achieve synergies in the following areas: (1) Strategic integration; (2) Organizational, human resources, and cultural integration; (3) Business integration; (4) Asset integration. Article 16 Commercial banks should assess operational and financial risks, including but not limited to the following aspects: (1) The main risks of operating the merged enterprise post-merger, such as whether the industry development and market share can maintain a stable or growing trend, whether corporate governance is effective, whether the management team is stable and competent, whether the technology is mature and can enhance the company's competitiveness, whether financial management is effective, etc.; (2) The future cash flows of the acquiring parties and their stability, the dividend policy, and their impact on the repayment of merger loans; (3) The risk of pricing the merger equity (or assets) higher than the fair value of the target company's equity (or assets). Article 17 Based on a comprehensive analysis of various risks related to mergers and acquisitions, commercial banks should establish a prudent financial model, calculate the future financial data of the acquiring parties and the targets, as well as key financial leverage and debt repayment capacity indicators that have a significant impact on merger loan risks. Article 18 Commercial banks should conduct scenario analysis and stress tests based on the financial model calculations, fully considering the impact of various adverse scenarios on merger loan risks. Adverse scenarios may include but are not limited to: (1) Adverse changes in the macroeconomic environment, industry concentration defaults, and credit rating downgrades of the acquiring parties; (2) The operating performance (including cash flow) of the acquiring parties not maintaining a stable or growing trend during the repayment period; (3) The failure to achieve synergies between the acquiring party and the target company post-merger. Article 19 If there are related relationships between the acquiring party and the target company, commercial banks should strengthen pre-loan investigations, understand and grasp the economic motivations of the merger transaction, the feasibility of integration between the acquiring parties, the potential for synergy, etc. Verify the authenticity of the merger transaction and the reasonableness of the merger transaction price, and guard against affiliated entities using false merger transactions to obtain bank credit funds. Article 20 Commercial banks should generally require borrowers to provide guarantees covering the risks of merger loans, including but not limited to asset mortgages and equity pledges, as well as other forms of guarantees in accordance with legal requirements. When pledging the equity of the target company, commercial banks should use a more cautious approach to evaluate the equity value and determine the pledged ratio. Article 21 Commercial banks should conduct thorough due diligence and risk assessments, confirm the authenticity of the merger transaction and the reasonableness of the application for merger loans, comprehensively evaluate the borrower's repayment capacity and the profitability of the post-merger entity, and form a loan approval opinion. Article 22 Based on the risk assessment results of merger loans, commercial banks should determine the contents of key terms such as loan amount, term, interest rate, installment repayment plan, and collateral method reasonably to consider the cost-benefit ratio. Article 23 Commercial banks should include key clauses in the loan contracts that protect their interests, including but not limited to the following: (1) The borrower is obligated to regularly submit financial statements of the acquiring parties, guarantors, and other necessary documents to the commercial bank and continue to meet the binding terms of significant financial indicators of the borrower; (2) Commercial banks have the right to be informed or approved of significant changes in equity, operation, finance, and investment of the acquiring parties post-merger, and have the right to take risk control measures for significant adverse changes; (3) Loan disbursement conditions and fund usage for merger loans, as well as necessary account monitoring, voucher collection, and other measures to monitor fund flows. Article 24 Commercial banks should comprehensively consider the risks of the merger transaction and merger loan, determine the ratio of merger loans to the transaction price prudently, ensure that a reasonable proportion of equity capital is included in the merger funds, and guard against high leverage merger financing risks. The proportion of control-type merger loans to the transaction price should not exceed 70%, and the proportion of equity capital in the transaction price should not be less than 30%. The proportion of stake-type merger loans to the transaction price should not exceed 60%, and the proportion of equity capital in the transaction price should not be less than 40%. Article 25 Control-type merger loans should have a term not exceeding ten years, and stake-type merger loans should have a term not exceeding seven years. Article 26 Before loan disbursement, commercial banks should confirm that the borrower meets the disbursement conditions stipulated in the contract. The disbursement conditions should at least include the full payment of other merger transaction funds according to the agreed schedule, and compliance of merger transaction legal conditions. If the borrower applies for merger loans to pay the merger transaction price, a trustee payment method should be used in principle. If a trustee payment method is truly impossible, necessary measures should be taken to ensure the legality and compliance of fund usage. Article 27 Merger loans used to replace the upfront payment of the merger price should meet the requirements in these measures regarding the minimum proportion of equity capital and may not be used to replace already obtained merger loans. The time interval between the first loan disbursement and the completion of payment of the full merger transaction price to be replaced should not exceed one year. Article 28 Commercial banks should strengthen the management of loan funds after disbursement, track the implementation of mergers in a timely manner, closely monitor the fulfillment of key terms in loan contracts, monitor risk factors affecting the borrower's debt repayment capacity, and guard against fund embezzlement by the borrower or affiliated entities using false merger transactions to obtain loan funds. If any irregularities are found, timely measures such as increasing guarantees, adjusting loan disbursement conditions or repayment plans, freezing or terminating credit limits, early loan repayment, etc., should be taken. Article 29 The ratio of the merger loan balance for a single borrower to the net of primary capital of the same period in the same bank should not exceed 2.5%. The ratio of the total merger loan balance of the commercial bank to the net of primary capital of the same period should not exceed 50%. The balance of stake-type merger loans should not exceed 30% of the total balance of all merger loans in the bank. Article 30 Commercial banks should establish corresponding limit control systems for the concentration level of merger loans based on their development strategies for merger loan businesses, respectively for a single borrower, group clients, industry categories, countries, or regions. Commercial banks can adopt syndicated loan structures to control client concentration and reasonably diversify risks. Article 31 The China Banking Regulatory Commission and its dispatched agencies may require commercial banks to conduct prudent supervision based on their business management conditions, risk levels, and the development of merger loan businesses. If commercial banks fail to meet the conditions for conducting business or violate the provisions of these Measures, thereby unable to effectively control merger loan risks, the China Banking Regulatory Commission and its dispatched agencies may take regulatory measures or impose administrative penalties in accordance with relevant laws and regulations. Article 32 Policy banks, foreign bank branches, and enterprise group finance companies should follow these Measures when engaging in merger loan businesses. Article 33 These Measures are explained by the China Banking Regulatory Commission. Article 34 These Measures shall come into effect as of the date of issuance. The Notice on the Issuance of the "Guidelines for the Risk Management of Commercial Bank Merger Loans" (Yin Jian Fa [2015] No. 5) issued by the China Banking Regulatory Commission is hereby abolished. This article was selected from the official website of the "China Banking Regulatory Commission". Editor: Liu Jiayin.