SCIO briefing on operations and performance of the banking and insurance sectors in the first quarter of 2020

The State Council Information Office held a press conference on April 22 in Beijing to brief the media about the operations and performance of the banking and insurance sectors in the first quarter of 2020. April 23, 2020

China Review News:

The Luckin Coffee fraud has garnered a great deal of attention recently. What is the supervision department's take from this? How many loans has Luckin taken from the banks? What are the risks? Will the directors liability insurance cover this? Thank you.

Huang Hong:

I'd like to invite Mr. Cao Yu to answer this question.

Cao Yu:

Thanks for the question. Many people here are consumers. A market economy is governed by law. Observing disciplines, obeying laws and being honest is a basic requirement of Chinese law for the main body of a market economy. It is the legal obligation of all enterprises to truly, comprehensively and truthfully reflect the financial and accounting situation of enterprises.

The Luckin fraud is a flagrant offense, and it will offer profound lessons. The CBIRC will firmly support and actively cooperate with the department in charge to impose severe punishment according to law. A zero-tolerance attitude will be taken toward financial fraud to maintain a sound market environment. 

As far as we are concerned, Luckin Coffee has a small loan standing with the banks and an even smaller loan balance. We have already urged relevant banks to enhance capital risk monitoring and post-loan management. Regarding the directors liability insurance, Luckin Coffee bought the directors liability insurance before listing. There are four levels of insurance policy with a total limit of $25 million, and a dozen insurance companies from home and abroad have been involved. Some of them issued reinsurance to this business. We understand that the insurance companies have received Luckin's claims. Considering that the case is complicated, the investigation is still ongoing and uncertainty exists. We will urge relevant insurance companies to properly handle it according to laws and regulations and in accordance with the contract provisions of insurance policy. Thank you.

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