Instant View: China's Ant Group to restructure under central bank agreement
(Reuters) – Ant Group, the fintech affiliate of Alibaba Group Holding Ltd, is to restructure as a financial holding company, China’s central bank said on Monday.
Ant has formed a “comprehensive and feasible restructuring plan,” at the urging of financial regulators, the People’s Bank of China said.
Last November, regulators halted Ant’s planned $37 billion stock listing, days before it was due to list in what would have been the world’s largest IPO.
NAN LI, ASSOCIATE PROFESSOR OF FINANCE, JIAOTONG UNIVERSITY, SHANGHAI
“The regulatory talk on April 12, 2021, is not a surprise at all to me. The nature of fintech is to apply information technology to improve the efficiency of financial intermediation, whose fundamental special role in the economy is to channel the fund from net savers (households) to net users (corporations).
“The financial intermediation, as a ‘delegated monitor’, helps to reduce the information asymmetry between net savers and net users of fund and monitoring costs through the economy of scale in collecting and processing information and diversification of risk.
“To diversify and enjoy the economics of scale, the FIs need to get big. Hence, financial regulation is necessary to monitor the monitor so that the FIs do not take advantage of households and corporations based on their sheer size.
Moreover, appropriate regulation is needed to separate different functions of the FIs to refrain from the over-risk-taking behaviour of FIs that may arise due to conflict of interests and moral hazard.
“This is why the payment services should be separated from the credit services (Huabei and Jiebei). This is also why the adequate capital ratio is imposed on any financial institution, including Ant Group.
“This is also why the data of consumers and producers collected from payment services and clearing houses should be under the oversight of the central bank instead of kept in the hands of private parties.”
DONG XIMIAO, CHIEF ANALYST AT ZHONGGUANCUN INTERNET FINANCE INSTITUTE
“The restructuring plan is stricter than expected, it means that Ant would need at least 200 billion yuan in registered capital to comply with the capital adequacy rule for financial holdings company.”
“There’s less uncertainty now as the restructuring plan finally lands, but we still need to wait and see how Ant implement all those requirements during the process.”
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