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Ant Group Weighs Forming Holding Company, Regulated Like Traditional Financial Firms

2020-12-29 10:29:02

Ant Group Co Ltd is considering moving most of its online finance business, including consumer loans, into a holding company that would be regulated like traditional financial firms, said two people with direct knowledge of the matter.

The regulators, mainly the central bank, want Ant to merge its asset management and insurance distribution activities and MYbank's minority-owned online lender into a financial holding company, one source told Reuters.

It was not clear whether Ant & # 39; s payments company Alipay, which was launched in 2004 and is the second largest revenue generator for the group after consumer loans, would also fall under the structure of the holding company.

Ant declined to comment.

Beijing may also be trying to take a greater stake in billionaire Jack Ma's companies, the Wall Street Journal reported Tuesday, citing unidentified Chinese officials and government advisers.

Alibaba Group and Ant did not immediately respond to Reuters' requests for comment on the report, which did not provide details on which of the companies the government is monitoring.

The People & # 39; s Bank of China (PBOC), the central bank, said in a statement to Reuters that Ant is drafting a plan to create a financial holding company and that the company must ensure that all its financial activities are under supervision of the regulatory authorities.

Ant controls a range of financial institutions, including securities and insurance companies, and is required by law to set up a holding company, the central bank said Tuesday.

The proposed changes to the Chinese fintech giant's companies are not yet final and subject to review, the sources said, who sought anonymity because they were not authorized to speak to the media.

Chinese regulators abruptly halted Ant's $ 37 billion IPO in Shanghai and Hong Kong, which would become the largest in the world last month.

Since then, regulators have begun to curb Ma & # 39; s financial and e-commerce empire after he openly criticized China's regulatory system in October for suppressing innovation.

On Sunday, the central bank said it had asked Ant, whose activities include payment processing, consumer credit and insurance product distribution, to shake up its lending and other consumer financial activities.

The move, if completed, would drastically lower the revamped Ant's valuation, which would be valued at $ 315 billion on market debut, primarily due to its structure as a technology provider to financial institutions rather than a financial company itself.

Ant, a spin-off from Alibaba, has presented itself as a technology company in recent years, helping it capitalize on the much richer valuations the market offers technology companies than financial institutions.

Bloomberg News said Tuesday that Ant planned to move to holding company to any unit that would require a financial permit, pending regulatory approval.

In September, the PBOC enacted rules to regulate financial holding companies to avoid systematic risks to China's massive financial sector. These steps include a capital threshold for such licenses.

A source said Ant's financial holding company should be regulated accordingly, but expected a lot of discussion between Ant and regulators about which companies would be placed in the holding company.

In its IPO prospectus filed in August, Ant said it would use the newly created unit Zhejiang Finance Credit Network Technology Co to apply for a financial holding license, without disclosing which of its financial activities would be merged into it .

After years of largely hands-off treatment of domestic internet financing platforms, Beijing has passed a slew of rules in recent months to tighten up oversight of the booming industry.

China's banking and insurance regulator on Tuesday warned consumers to guard against loans spurred by internet finance platforms hiding the true cost of such debt.

(Reporting by Julie Zhu in Hong Kong and Cheng Leng in Beijing; additional reporting by Maria Ponnezhath and Munsif Vengattil in Bengaluru; writing by Sumeet Chatterjee; edited by Clarence Fernandez and Jason Neely)

Photo: A view of the fintech giant Ant Group's headquarters in Hangzhou, Zhejiang Province, China. The People & # 39; s Bank of China, the country's central bank, convened Ant executives on Saturday, December 26, 2020 and ordered them to draw up a recovery plan and timetable for the implementation of its activities, including its credit, insurance and asset management services, the regulators said in a statement on Sunday, Dec. 27, 2020. Photo credit: Chinatopix Via AP.

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