Co-lending restrictions deal another blow to Ant Group

Jack Ma Yun’s Ant Group and China’s other fintech giants were dealt another blow by new rules that target a lucrative growth area – joint lending with banks, Bloomberg reports.

Banks must cap overall co-lending with internet platforms or other partners at no more than 50 percent of outstanding loans, the China Banking and Insurance Regulatory Commission said on Saturday. Co-lending with one platform shouldn’t exceed 25 percent of the bank’s tier-1 net capital.

The restrictions add to draft rules for online lenders issued late last year, which heralded an abrupt loss of appetite for free-wheeling fintech innovations among regulators. The derailment of Ant’s US$35 billion share sale and mounting scrutiny of its operations have since upended one of China’s biggest business success stories. The authorities have also cracked down on technology juggernauts in everything from e-commerce to credit-scoring and payments.

“The new rules are mainly targeted against the big techs who are more reliant on the co-lending business model,” Citigroup analysts led by Judy Zhang wrote in a note. They “can prevent banks from over-relying on online lenders for credit assessment and over-concentrating on selective fintech partners.”

From January 1, 2022, an internet platform will be required to provide at least 30 percent of the funding itself in any single joint loan with a bank, the CBIRC said.

The regulation is expected to further cripple growth at Ant, whose Jiebei and Huabei units had facilitated 1.7 trillion yuan (US$263 billion) in consumer loans to 500 million people as of June 30, with only about 2 percent being kept on the parent’s balance sheet. Concerns that it will need to raise capital to plug the shortfall and seek national licenses have prompted analysts at Morningstar Inc. and others firms to slash estimates on Ant’s valuation by half from US$280 billion before its scrapped listing.

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