Ant Group to form a financial holding company under regulators’ supervision

11 Apr, 2021 22:15
source: Singularity Financial

Singularity Financial Hong Kong April 11, 2021 – Ant Group, controlled by Chinese billionaire Jack Ma, said on Monday it will apply in its entirety to become a regulated financial holding company after China’s top regulators publicly mapped out a blueprint for overhauling the financial technology company.

The People’s Bank of China (PBOC) and other financial regulators directed Ant on Monday to correct “improper competitive behaviour” surrounding Alipay, break an “information monopoly” over data collection and end “inappropriate” links between Alipay and its consumer-lending operations. They also called for Ant to shrink the assets under management of its money market fund, Yu’ebao.

The regulators also required Ant to reduce the risk of financial contagion across key businesses, as well as to control high leverage. The rules will cover everything from sourcing and use of funds, maintaining a fat capital buffer and proofing risk management systems, to showing that it can protect consumers’ data from hacks and leaks.

Monday’s announcement followed a meeting between Ant and the nation’s biggest financial regulators, including the PBOC, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission, and the State Administration of Foreign Exchange, said the central bank’s deputy governor Pan Gongsheng.

The People’s Bank of China said that under a “comprehensive and feasible restructuring plan,” Ant would cut the “improper” linkage between payments service AliPay, virtual credit card business Jiebei and consumer loan unit Huabei.

“Ant Group attaches great importance to the seriousness of the rectification,” the company said in a statement, adding it planned to set up a personal credit reporting business and to fold its two flagship lending businesses into its consumer finance company.

The restructuring plan also came two days after another watchdog, the State Administration for Market Regulation (SAMR), slapped Alibaba Group Holding with a 18.2 billion yuan (US$2.8 billion)  fine for violating the country’s anti-monopoly law.

Details of the plan may also provide clues about the approach regulators will take with other, smaller Chinese fintechs, said analysts.

Ant will now effectively be supervised more like a bank, a move with far-reaching implications for its growth and ability to press ahead with a landmark initial public offering that the government abruptly delayed late last year.

Before regulators stepped in, Ant’s IPO would have pegged the company’s valuation at US$313 billion. Including an overallotment option, Ant’s market value would have hit US$318.5 billion, eclipsing JPMorgan Chase, the world’s biggest bank.“The darkest hour for Alibaba has passed, but I wouldn’t say so for Ant Group,” said Dong Ximiao, chief researcher at Zhongguancun Internet Finance Institute. “The latest announcement clarified the framework for Ant’s restructuring, but the tone is still harsh and some of the requirements are tougher than expected. I don’t think the overhang is removed for Ant investors at this stage.”