Micro lenders, consumer finance firms, and banks operated by internet platforms should all have adequate capital like other financial institutions. Chinese financial regulators have rolled out a slew of measures since 2020 to tighten the oversight of online lending practices in the country, particularly of technology firms looking to expand into the financial space, moving away from its once laissez-faire approach.
The drive scuppered Ant Group’s USD 37 billion initial public offering in 2020 and has seen Alibaba’s fintech affiliate formulate plans to shift to a financial holding company structure. Financial regulators have set various grace periods for different internet platforms. Some had until the end of 2020 and others have until the middle of 2021 to meet capital adequacy requirements. With regards to Ant Group’s restructuring, there reportedly were no restrictions on the financial business it develops but that all of its financial activities should to be regulated by laws.
Ant Group is in talks with other shareholders in its new consumer finance unit to bolster the firm’s capital as the fintech giant prepares to fold in its lucrative micro-lending businesses, Reuters reported in February 2021. It would need an additional capital of 30 billion yuan (USD 4.64 billion) to meet regulatory requirements.
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