An Ant Group logo is depicted at the company’s headquarters, an Alibaba affiliate, in Hangzhou, Zhejiang province, China, October 29, 2020.
Aly Song | Reuters
On Saturday, China’s banking regulator tightened demands on the commercial lending business over the Internet amid an intensified scrutiny of online lending by Internet giants like Ant Group, the financial arm of the Alibaba Group.
Commercial banks must jointly contribute funds to issue loans over the Internet with a partner, and the partner’s equity ratio in a loan should not be less than 30%, the China Banking and Insurance Regulatory Commission said in a statement.
The balance of Internet loans issued by a bank with a partner, including its related parties, is not expected to exceed 25% of the bank’s first-tier net equity, the report said.
In addition, the balance of Internet loans issued jointly by commercial banks and cooperative institutions cannot exceed 50% of the bank’s total balance, the guidelines state. In a separate question and answer document, the regulator said that companies must comply with the new rules by July 17, 2022.
The regulations will increase potential capital needs for technology platforms like the Ant Group, which was on its way to raising $ 37 billion in an IPO based on its wide range of online lending services.
Those hopes were dashed when China’s regulators stepped in to stop listing in November because of concerns that over-borrowing consumer debt posed a threat to the country’s financial system.