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China fintech: banking and insurance watchdog CBIRC lays out ways it may punish risky consumer finance companies
- Consumer finance companies with lowest grade could face nationalisation
- Grading system comes after Beijing suspended Ant Group IPO
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China’s top banking and insurance watchdog has created a trial framework for grading consumer finance companies, which could lead to the break-up of the most errant industry players.
The China Banking and Insurance Regulatory Commission (CBIRC) said it would judge these companies on factors such as corporate governance, internal controls, capital and risk management, professionalism and technology, according to a notice on its website on Wednesday. The notice was issued on December 30, but it has only been made public now.
The rating system comes as China clamps down on its rapidly growing consumer finance sector, citing systematic risk and customer complaints. Beijing dramatically suspended the initial public offering of the world’s largest financial technology company, Ant Group, in November.
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Smaller fintech and consumer finance players are hoping that the regulator will curb Ant Group’s business activities, creating more space for them to grow. E-commerce giant JD.com has already restructured its financial arm JD Digits into a new group called JD Technology, which combines its fintech, artificial intelligence and cloud businesses.
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The companies will be graded on a descending scale of one to five, where a consumer finance company graded one is relatively sound. A grade two firm will show minor problems.
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