Ant gets green light for consumer credit unit as a thaw sign
(Bloomberg) – China allows Jack Ma’s Ant Group Co. to start operations for its consumer finance company, the first sign of progress after a regulatory crackdown torpedoed the fintech giant’s record list.
The unit, registered in Chongqing, will be allowed to lend to individuals, issue bonds and borrow from domestic financial institutions, according to a notice from the China Banking and Insurance Regulatory Commission on Thursday.
The approval marks an important milestone in Ant’s overhaul as it becomes a financial holding company that will be regulated more like a bank. The new unit will allow Ant to pursue consumer lending, its most lucrative operation, although it is not known how this would affect the scale of this business.
“There are ambiguities, but the significance is that this is a step forward,” said Shujin Chen, Hong Kong-based analyst at Jefferies. The move will limit Ant’s ability to lend, but it remains to be seen whether regulators will allow her to continue distributing loans to other institutions for a fee, she said.
Ant will now have to transfer its online lending operations and outstanding loans to the unit. Chongqing Ant Consumer Finance Co. will have a registered capital of 8 billion yuan ($ 1.3 billion) and Ant will hold a 50% stake.
China Huarong Asset Management Co. is also among the shareholders, with a 4.99% stake. Other investors include Nanyang Commercial Bank Ltd., China TransInfo Technology Corp. and Contemporary Amperex Technology Co.
The banking regulator said Ant will have to comply with the laws by fully disclosing borrowers, loan terms, annual interest rates and delinquent loans.
Ant will work with other shareholders “to meet the needs of consumers and continue to improve the quality of financial services and risk management capabilities,” a spokesperson for the company said in a text message.
Separately, Financial News, backed by the People’s Bank of China, announced that the consumer credit unit will take over qualifying businesses from two Ant Group small loan companies, which will close within a year of starting up. the new unit.
The two most important brands for small loan companies – Huabei and Jiebei – can only be used for loans backed by capital from the consumer finance company, 21st Century Business reported, citing an unidentified official of the banking regulator. Loans co-financed by banks will have to specify the source of funding and cannot use the names Huabei and Jiebei, the person added, according to the report.
Prior to the crackdown, Ant had a thriving business that distributed small, unsecured loans through both brands. Overall, its CreditTech business was its main source of income, contributing 39% of the total in the first six months of last year.
In the past, consumer finance companies were generally allowed to lend 10 times their capital. Ant, China’s largest online consumer loan provider, issued an estimated 1.7 trillion yuan in consumer microloans to 500 million people last June.
Fintech platforms have since been criticized for not having enough collateral and for lending to low-income youth and youth. In February, the banking regulator imposed restrictions on banks and financial institutions working with online microlenders, capping the amount of joint loans they can make with the platforms. The watchdog also said fintechs will need to increase their share in any joint loan, according to proposed industry regulations.
Consumer credit is becoming increasingly competitive in China. More than 20 of these companies sprang up after the banking regulator launched a pilot program in 2010 to promote purchases of durable goods such as household appliances. These firms, although unable to take deposits, can finance their loans by borrowing in the interbank market, from shareholders, and by issuing bonds and asset-backed securities.
(Updates with analyst commentary in fourth paragraph, Ant statement in sixth)
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