(Bloomberg) -- China’s financial watchdog plans to step up oversight of monopolistic practices in financial technology, calling for preemptive measures to ensure fair competition and stability in escalation of a push that earlier this month halted Ant Group’s $35 billion initial public offering.
While encouraging innovation, regulators should pay close attention to the risks and challenges brought by digitization, Liang Tao, a vice chairman of the China Banking and Insurance Regulatory Commission, said at a conference in Beijing on Wednesday. Fintech doesn’t change the nature of the financial industry and should be subject to the same supervision and risk management requirements as banks, he said.
Regulators last week proposed new rules to curb the rapid growth and leverage at the nation’s more than 200 micro-loan lenders, putting a surprise halt to Ant’s record IPO and sending shockwaves through the markets. Authorities this week also turned up heat on internet behemoths including Alibaba (NYSE:BABA) Group Holding Ltd., an affiliate of Ant, and Tencent (HK:0700) Holdings (OTC:TCEHY) Ltd. with antitrust rules to curtail their growing dominance. Both stocks tumbled, sparking a wider selloff in Chinese equities.
Ant and other fintech giants such as Tencent, using big data and cloud computing, have grabbed market share from commercial banks in the lucrative consumer lending space by providing easier access to credit for younger users online, many of whom have little income nor credit history.
CBIRC called for better education for borrowers and bans on platforms from inducing customers to borrow beyond their needs and means. In areas where a market monopoly can be spotted, the regulator will step up probes to ensure fair competition and market order, Liang said.
Licensed financial institutions should also assess the risks of their partners and are banned from outsourcing their information technology, risk management and internal auditing, Liang said.
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