File photo: IC

All peer-to-peer (P2P) online lending platforms in Central China's Hunan Province - including 24 that had failed to pass regulatory reviews - have been taken down, according to a government statement released on Wednesday. 

Experts said that most P2P services are being taken down for a lack of risk control and poor information disclosure.

According to the statement released by the Hunan Provincial Local Financial Supervision Administration, the 24 P2P platforms had been told to submit to regulatory checks, but no organization or platform passed the checks and examinations. 

The statement also said that all other P2P operations would be taken down, making Hunan the first province to take down all P2P services. The statement didn't give the total number of P2P services.

The Hunan provincial government has been undertaking vigorous examinations of the P2P online lending industry since 2016, with zero platforms passing the checks, the statement said. 

"A healthy lending platform should have a functioning risk assessment and control department, as required by the central bank and other regulators," Tian Yun, a vice director of the Beijing Economic Operation Association, told the Global Times on Thursday. "But very few organizations have that."

So far this year, seven provincial-level governments have announced lists of unregulated P2P platforms, a report by jiemian.com said, including Jinan, East China's Shandong Province, as well as Southwest China's Sichuan and Yunnan Provinces, Shenzhen in South China's Guangdong Province, and Shanghai.

In recent years, the online lending industry has been the focus of high-profile scandals with billions yuan of losses and major company exits. In 2016, one of the most prominent platforms - Ezubao  - was taken down, after having fleecing about 50 billion yuan ($7.6 billion) from 900,000 investors, many of which are small investors. 

"There is a huge risk in too much leverage for small and medium-sized enterprises or individual investors," Tian said. "These investors are especially vulnerable to high risks, and investment failures or runaway bosses could have devastating consequences on them."

Dong Dengxin, director of the financial securities institute at the Wuhan University of Science and Technology, noted that without any means for authorities to conduct thorough, real-time supervision of the operation of P2P firms, there is a high risk of capital problems.

"To avoid such risks, the industry overall will contract as regulations become tighter," Dong said.

The China Banking Regulatory Commission issued a series of policy recommendations in 2016 and 2017, which have been taken as the criteria against which governments assess local lending platforms. Local regulators of the online lending industry have also been rolling out documents to drive out participants that don't meet certain criteria, including real-time data updates and company operation information disclosure. 

"It is hard to say whether this is the beginning of the end for the sector, but it is a sign that regulators are treading more carefully between the balance of risk and financial innovation," Tian said.