Beijing authorities further restrict Internet finance business.
After shrinking the authority of Internet platforms in commercial banks’ online loans in July last year, Beijing authorities recently issued another notice stipulating the contribution ratio and loan limits. Foreign media analysis shows that the business of Internet financial platforms such as Ant Group may continue to be weakened.
The Communist Party of China (CPC) Banking and Insurance Regulatory Commission (CBIRC) issued a news release on February 20 and recently issued a notice on further regulating commercial banks’ Internet lending business.
The circular requires commercial banks to conduct risk management of their Internet loan business alone and requires that when commercial banks and partner institutions jointly fund the issuance of Internet loans, the percentage of the partner’s contribution in a single loan shall not be less than 30%; the balance of the Bank’s loans issued with a single partner shall not exceed 25% of the Bank’s net Tier 1 capital and the balance of Internet loans shall not exceed 50% of the Bank’s entire loan balance.
The above notice covers branches of foreign banks, trust companies, consumer finance companies, auto finance companies, etc.
Bloomberg cited an analysis on Feb. 20 that said Beijing authorities have taken an abrupt turn against fintech companies since the second half of 2020, including calling a halt to Ant Group’s IPOs on both the mainland and in Hong Kong, and the ensuing new regulations on everything from e-commerce to online lending businesses.
Analysts estimate that Ant Group’s current valuation may have been cut in half from the $280 billion it was worth before the planned IPO.
In early February, Bloomberg quoted anonymous sources familiar with the matter as saying that at least 10 mainland banks had scrapped their joint lending business on Ant Group’s platforms.
In October last year, Jack Ma publicly criticized “financial pawnshop thinking” at the second Bund Financial Summit, saying “supervision and control are not the same, policies and documents are not the same, today it is not allowed that too many documents, too few policies. Regulation to later, became their own no risk, their own sector no risk, but the entire economy has risk, the entire economy does not develop the risk.”
On November 3, the Chinese Communist Party officially called off the simultaneous listing of Ant Group in A shares and Hong Kong shares, which was scheduled for November 5.
The Wall Street Journal on Feb. 16 cited anonymous sources familiar with the matter as saying that Beijing authorities were investigating Ant Group before Ma’s speech in October and found that Ant Group’s shareholders included Boyu Capital, a private equity fund founded by Jiang Zemin’s grandson Jiang Zhicheng.
In July 2020, before Ma’s speech, the authorities had issued the “Interim Measures for the Management of Commercial Banks’ Internet Loans”.
At that Time, some analysts believed that according to the definition of “Internet lending business” and “cooperative institution” in the Interim Measures, fintech companies could only participate in Internet lending as cooperative institutions of banks. According to analysts, according to the definition of “online lending business” and “cooperative institution”, fintech companies can only participate in Internet lending as cooperative institutions of banks, need to obtain licenses from regulatory authorities, and cannot charge fees or share interest directly with borrowers; fintech companies can only provide technology to banks, and cannot participate in screening customers and credit information processing activities.
The “Notice on Further Regulation of Commercial Banks’ Internet Lending Business” is considered to be a “strengthened version” of the above “interim measures”.
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