China Tightens Rules For Banks On Internet Lending

China’s bank regulator is tightening restrictions on internet loans made by commercial banks and looking more into online lenders in general, Reuters reported.

The move comes as tech giants in the region like Ant Group are being more closely watched to avoid monopolistic actions, according to Reuters.

In a notice, the China Banking and Insurance Regulatory Commission said commercial banks now have to jointly contribute funds to issue online loans with a partner, Reuters reported. The proportion of capital must not be less than 30 percent. The balance of the internet loans issued by a bank with one partner, including any related parties, shouldn’t go higher than 25 percent of the bank’s net tier-one capital.

And, the regulator specified that the balance of internet loans issued jointly by commercial banks and cooperative institutions must not go beyond 50 percent of the bank’s total balance, Reuters reported.

A separate document seen by Reuters said the banks must start cooperating by July 17, 2022, according to the report.

With the regulations, Reuters reported that the potential capital needs for companies like Ant Group will rise. Ant was on the way to a historic $37 billion initial public offering (IPO) for its wide range of online services. That was dashed when the government halted the listing. Details came out afterward about President Xi Jinping’s anger at Ant founder Jack Ma’s statements about government regulations going too far. And later, it was revealed that there were also concerns over the leadership at Ant Group.

Chinese regulators reached a deal with Ma earlier this year to turn his FinTech into a financial holding company, which would have the effect of making Ant operate under bank-like rules, with stricter capital requirements.

In general, China has been looking into concerns that numerous firms have been over-lending to consumers. Ant, along with Tencent and, will have to share more data on their consumer lending.