China’s banking regulator imposed new restrictions on banks and financial institutions working with online microlenders including those led by Jack Ma’s Ant Group, dealing further blows to one of the fastest-growing business segments for financial-technology behemoths.
Banks must cap overall joint lending with internet platforms or other partners at no more than 50% of their outstanding loans, the China Banking and Insurance Regulatory Commission (CBIRC) said in a statement on Saturday. Co-lending with one platform should not exceed 25% of the bank’s tier-1 net capital, the CBRIC said.
The new restrictions add to draft rules issued on the booming sector late in 2020, which heralded a sudden shift in the regulatory stance on fintech, scuttling Ant’s $35bn share sale just days before it was due to go public in Shanghai and Hong Kong. The move upended one of China’s biggest business success stories and was followed by crackdowns on technology juggernauts in everything from e-commerce to credit-scoring and payments.
The CBIRC said on Saturday that from January 1 2022, a platform will be required to provide at least 30% of the funding itself in any single joint loan with a bank.
The regulation is expected to further cripple growth at Ant, whose Jiebei and Huabei units had facilitated 1.7-trillion yuan ($263b) in consumer loans to 500-million people as of June 30, with only about 2% being kept on the parent’s balance sheet. Concerns that it will need to raise capital to plug the shortfall and seek national licences have prompted analysts at Morningstar and others firms to slash estimates on Ant’s valuation by half from $280bn before its scrapped listing.
A local bank cannot extend online loans outside its home base;
CBIRC and its local branches may propose tougher requirements on the amount and share in co-lending arrangements.
Latest rules will also apply to foreign banks, trust firms, consumer finance companies and auto finance businesses
Ant and at least a dozen banks have been paring back their years-long co-operation on consumer-lending platforms in recent months, people familiar with the matter said in February. That has taken place in parallel with Ant’s discussions with Chinese authorities on a restructuring plan. Bloomberg reported earlier that Ant has agreed to become a financial holding company, making it subject to capital requirements similar to those for banks.