China's top watchdog vows 'special' oversight of fintech giants like Ant

Ant faces more regulations after the recent crackdown that derailed its S$46.9 billion IPO.
Ant faces more regulations after the recent crackdown that derailed its S$46.9 billion IPO.PHOTO: REUTERS

BEIJING (BLOOMBERG) - China plans to impose "special and innovative regulatory measures" on financial technology behemoths such as Jack Ma's Ant Group to eliminate monopolistic practices and strengthen risk controls.

Advances in technology have brought tremendous change to the financial sector, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission and Party Secretary of the central bank, wrote in an article outlining regulations over the next five years. It was cited in the official Shanghai Securities News.

Financial innovations are a "double-edged sword," Mr Guo said. There's little "experience in legal standards and risk monitoring for mobile payments or internet borrowing and insurance in our country," he said.

Mr Guo is the highest ranking regulator to weigh in on the issue after regulators last month halted the planned record initial public offering of Mr Ma's Ant Group. China has also called for deeper antitrust oversight of technology firms such as Alibaba Group Holding and Tencent Holdings, which have expanded into finance with little oversight, posing a growing challenge to traditional banks and regulators.

The article was published in conjunction with pieces by central bank governor Yi Gang and China Securities Regulatory Commission (CSRS) chairman Yi Huiman. Having China's three top financial watchdogs weigh in on regulations at the same time shows curbing financial risk has moved firmly to the centre of the national agenda.

Ant faces more regulations after the recent crackdown that derailed its US$35 billion (S$46.9 billion) IPO. The chance that Ant will be able to revive its massive stock listing next year is looking increasingly slim as China overhauls its rules, according to regulators familiar with the matter.

In a rebuke to Ant's founder Mr Ma, Mr Guo said that the core part of the global Basel Accords is to use capital requirements to constrain lending and keep leverage in a safe range. "Without adequate capital, financial services will get into trouble sooner or later," Mr Guo said.

Mr Ma riled up regulators after he in a speech late October blasted authorities and banks, comparing the Basel capital rules to a club for the elderly. Ant's platform has provided quick loans to more than 500 million people.

"The regulations should cover all financial institutions, businesses and products," Mr Guo wrote, saying online loan companies have skirted the rules under the camouflage of "financial innovation."

Mr Guo also didn't spare China's property market. It's the biggest "gray rhino" in terms of financial risks in China at this stage, he said. The term refers to a very obvious yet ignored threat.

In his article, the central bank governor urged more regulations on systemically important financial institutions as part of China's five-year plan that kicks off next year. CSRC chairman Mr Yi called for more direct financing and further bond market developments.