Internet finance industry giant Ant Group 18 shelves Internet deposit products triggered an “earthquake”, Jingdong Finance, Lufax, Tencent Wealth Management, Baidu Du Xiaoman and other platforms quickly followed within three days, making the product nearly wiped out. Small banks and private banks are the main force in the launch of high-interest deposit products through the Internet, and they also bear the brunt of this “earthquake”. For this “shelf tide”, many voices believe that the regulatory layer of risk control in place in a timely manner, there are also concerns that the policy will be “one-size-fits-all”, taking away the gain of Internet products to small and medium-sized banks. The company’s main goal is to provide a balance between risk and benefit, which will be the focus of future regulations.
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The Ant Group 18 shelved the Internet deposit products triggered an “earthquake”, other head platforms have followed. (AFP)
What are Internet deposit products?
According to the Guangzhou Daily and Surfing News, Internet deposits are actually deposit products sold by banks through the Internet, and Jingdong Financial’s deposit product “Fumin Bao”, which was launched on Fumin Bank in 2018, is generally considered to be the beginning of Internet deposits. In the past two years, bank wealth management products continue to decline, Internet deposit products with the characteristics of “capital preservation and high interest” to attract many investors, gradually become an important channel for some small and medium-sized banks, especially private banks to absorb deposits.
Internet deposit products generally have the characteristics of high deposit interest rate and low purchase threshold. Sun Tianqi, director of the Financial Stability Bureau of the Central Bank of China, wrote in November that the deposits sold through the Internet platform are all fixed-term, with three-year and five-year maturities. The maximum interest rate is 2.25% for the one-year period, 4.125% for the three-year period and 4.875% for the five-year period, all of which are close to or at the upper limit of the national self-regulatory pricing mechanism. Nearly half of the products have a starting deposit of only 50 yuan and can be withdrawn in advance at any time.
The Securities Daily reporter found that many private banks have launched deposit products with returns of up to nearly 5%, and some of the platforms have been subsidizing the returns in order to solicit customers, and their subsidized returns have even reached 6%, making the platform selling some products with annualized returns of up to 7% or more a month.
On the Internet platform, the process of purchasing deposits takes only a few minutes, click on the “Deposit Now” button on the platform page, and then upload a photo ID on the opening page, the account is opened and completed, with no other restrictions. To purchase products, customers only need to bind their bank cards of big banks to the electronic account and the funds will flow into the purchased products. When the product expires, the funds are automatically returned to the electronic account. Generally speaking, banks pay “infusion fee” to the platform according to the platform’s average daily deposit balance of two to three thousandths of a percent.
At present, local small and medium-sized banks and even village banks, with the flow advantages of the Internet platform, the deposit scale to grow rapidly, some of the platform deposit scale accounted for 83% of its deposits.
The risk behind the hot sales is hidden, and the regulation has repeatedly issued a voice
According to the Guangzhou Daily, some people related to the mutual fund platform revealed that the regulation has not yet issued regulations, and there is no window guidance for the platform, and the downgrading is mostly the choice of the platform or the bank itself. However, many media believe that the recent statement by Sun Tianqi, director of the Financial Stability Bureau of the Central Bank of China, is the main reason for the downgrading of Internet deposits.
According to reports by China Business News, Sun Tianqi “named” Internet platform deposits on Nov. 14 and Dec. 15 respectively, pointing out that the liquidity characteristics of the products are different from traditional savings deposits and bring new issues to regulators and financial institutions. He characterized the Internet products, saying that the platform has become an online extension of bank branch services, and such platforms do not have financial licenses for related businesses, so they are outside of financial supervision and are essentially “driving without a license” to carry out financial business, which is an illegal financial activity.
Sun Tianqi pointed out that the problems involved in Internet deposits include: some banks disguisedly raise deposit interest rates by means of sectional interest payments, disrupting the deposit interest rate market mechanism; high-risk banks absorb deposits through Internet platforms, quenching their thirst, with hidden liquidity problems; small and medium-sized banks absorb deposits at high interest rates inevitably pursuing high-yield assets, matching high-risk projects, leading to increased risk on the asset side.
He suggested strict regulation of Internet platforms involving financial products and services of all kinds of behavior. Internet platforms engaged in financial activities, must be licensed to operate, not “driving without a license”. To set up a business access threshold, into the scope of the corresponding financial supervision.
Prior to this, the regulator has adjusted the bank deposit business. In March, the Central Bank of China issued a notice on strengthening the management of deposit interest rates, requiring rectification of irregular deposit “innovation” products such as early withdrawal of time deposits with interest accruing on the file. The six major banks issued an announcement on December 14, calling for a halt to the “slotted interest rate”. The deposit products of “interest on file” are launched by banks to attract deposits, and their earnings are calculated according to the interest rate of deposit time segments. For a long time, the interest-bearing deposit products have been used as a “deposit attraction tool” for banks. Since then, such deposits in the six major banks, if withdrawn in advance only according to the interest rate of demand deposits.
The “shelf tide” impact on the liability side of small and medium-sized banks
For this tide of downgrades, some analysts believe that for the platform’s many businesses, the profit contribution of this piece of business is not large, so the impact is limited. The biggest impact is on banks that are under pressure to collect deposits, and users will have to choose low-interest products from large banks. unnamed industry sources quoted by IT House said they were worried that the subsequent policy would be “one-size-fits-all” for such products, and that the focus of attention was on how to balance the benefits and risks of Internet products to small and medium-sized banks.
According to Punch News, Dong Ximiao, chief researcher of Zhaolian Finance, also believes that the emergence of Internet deposit business, of course, there are factors such as banks’ unilateral pursuit of market share and blind expansion of deposit scale, but the banks that launched deposit products and business are mostly small and medium-sized banks, reflecting the dilemma of narrow sources of liabilities and high cost of liabilities of small and medium-sized banks.
Talking about the impact of the “downgrading wave” on small and medium-sized banks, Dong Ximiao said that small and medium-sized banks have weaker capital strength and more restrictions on liabilities, which affects their ability to allocate credit and is not conducive to serving the real economy, especially small and micro enterprises. Capital replenishment is an important means to enhance the ability to resist risks and serve the real economy, so they should be supported to introduce qualified shareholders for capital increase, support the issuance of new capital instruments and secondary capital instruments, and support qualified banks to raise capital through domestic and overseas listing.
He suggested revising the current approach to facilitate more small and medium-sized banks to enter the interbank lending market as soon as possible to carry out liquidity management and obtain funding sources through issuing financial bonds, so as to alleviate problems such as single source of liabilities. At the same time, the marketization of deposit rates should be further deepened, and a differentiated policy should be implemented to allow small and medium-sized banks to adopt a more flexible floating space for deposit rates under the market interest rate self-regulation mechanism.
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