The mainland increased the capital requirements of online lending enterprises, analysis pointed out that the ant to bear the brunt.
The mainland’s Banking and Insurance Regulatory Commission recently issued another notice to further strengthen the “interim measures for the management of commercial banks’ Internet loans” proposed in July 2020, which requires online lending platforms to cover 30% of the funds in the loans. The move is seen as another regulatory measure against Ant Group.
Xinhua News Agency reported that on February 20, the Communist Party of China Banking and Insurance Regulatory Commission issued a notice on further regulating commercial banks’ Internet loan business, further refining the “Interim Measures for the Management of Commercial Banks’ Internet Loans”, which was officially implemented in July last year. The notice further refines the prudential supervision requirements.
The report points out that the “Circular” specifies three quantitative indicators, including the ratio of capital contribution, i.e. commercial banks and partner institutions jointly fund loans, and the ratio of partner’s capital contribution in a single loan shall not be less than 30%; the concentration indicator, i.e. the balance of the Bank’s loans granted by commercial banks and a single partner shall not exceed 25% of the net Tier 1 capital In addition, the “Notice” also specifies that the balance of Internet loans granted by a commercial bank with a single partner shall not exceed 50% of the total loan balance.
In addition, the “notice” also claims to “strictly control cross-regional operations”, clearly local corporate banks are not allowed to carry out Internet loan business across the jurisdiction of their registered office.
This requirement is undoubtedly a higher requirement for online platforms and other online loan partners. The media quoted a banking source engaged in online finance as saying that when small and medium-sized banks cooperate with large online platforms in joint lending, the partner’s contribution ratio is usually only about 10% to 20%.
Ant Group, which had launched the world’s largest initial public offering (IPO) but was halted by Communist Party regulation, has been the first to bear the brunt of the tightening measures proposed by the Communist Party for online lending platforms.
Prior to these new funding rules, Ant Group contributed just 2 percent of its $100 billion in consumer loans, with most of the rest coming from partner banks.
The Financial Times quoted Kingdom Hui, founder of Bison Asset Management, as saying that the new rules could force fintech lending on the Chinese mainland to “shrink significantly” from its current size and could force the companies to operate more like commercial banks, and that “Ant’s business model will need to The report also cited Peking University’s finance department as saying that “the business model of Ant will need to change radically”.
Michael Pettis, a finance professor at Peking University, was also quoted as saying, “This would hit one of Ant Group’s fastest-growing business areas hard, and would almost certainly cause its eventual valuation to drop significantly.”
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