(Reuters) – Ant Group, the fintech affiliate of Alibaba Group Holding Ltd, is to restructure as a financial holding company, China\u2019s central bank said on Monday.<\/p>\n
Ant has formed a \u201ccomprehensive and feasible restructuring plan,\u201d at the urging of financial regulators, the People\u2019s Bank of China said.<\/p>\n
Last November, regulators halted Ant\u2019s planned $37 billion stock listing, days before it was due to list in what would have been the world\u2019s largest IPO.<\/p>\n
NAN LI, ASSOCIATE PROFESSOR OF FINANCE, JIAOTONG UNIVERSITY, SHANGHAI<\/p>\n
\u201cThe 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).<\/p>\n
\u201cThe financial intermediation, as a \u2018delegated monitor\u2019, 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.<\/p>\n
\u201cTo 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.<\/p>\n
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.<\/p>\n
\u201cThis 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.<\/p>\n
\u201cThis 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.\u201d<\/p>\n
DONG XIMIAO, CHIEF ANALYST AT ZHONGGUANCUN INTERNET FINANCE INSTITUTE<\/p>\n
\u201cThe 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.\u201d<\/p>\n
\u201cThere\u2019s 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.\u201d<\/p>\n