China’s antitrust regulator has expanded its anti-monopoly crackdown to the banking sector, penalising the two shareholders of a digital bank 500,000 yuan (US$78,280) each for failing to report their joint venture ahead of its formation in 2015. The State Administration for Market Regulation (SAMR) said on its website on the weekend that China Citic Bank and Fujian Baidu Bo Rui Netcom, which own 70 per cent and 30 per cent, respectively, of Citic AiBank, had violated the country’s anti-monopoly law. Fujian Baidu is controlled by Baidu, operator of mainland China’s dominant internet search engine. AiBank, known for its use of artificial intelligence in delivering banking services thanks to its AI-focused shareholder Baidu, was launched in 2017. AiBank is one of five digital banks in mainland China, representing a keenly watched market segment that has piqued the interest of foreign banks eyeing the country’s banking sector with assets of 339 trillion yuan. SAMR said the fine was the result of an investigation that started in August, but added that AiBank did not restrict or exclude competition in any way. While the fine is small, it signifies the regulator’s determination to deter banking players cutting corners on compliance, said Wang Feng, chairman of Shanghai-based financial services provider Ye Lang Capital. “Compliance and risk management will be the top priorities for banks and financial institutions in China over the next three to five years as the central government is adamant in weeding out irregularities in the industry,” Feng said. “It sends a clear message that the regulators will take a harsh stance on unlawful practices to ensure justice and fairness in the market.” Both Fujian Baidu and China Citic Bank can apply to SAMR to appeal against the fine within 60 days of the decision. They can also challenge the decision in courts within six months. However, SAMR said on its website that the case is considered closed and its decision will be enforced. China Citic Bank and Fujian Baidu did not reply to requests for comment on Tuesday. AiBank is the only digital bank in China that has a state-backed shareholder. The other four are privately owned. WeBank is backed by Tencent Holdings, MYbank is an affiliate of Ant Group, Sichuan Xiwang Bank is backed by the fintech arm of smartphone giant Xiaomi and Jiangsu Suning Bank is backed by retail giant Suning.com. Ant is an affiliate of e-commerce giant Alibaba Group Holding , which owns this newspaper. China’s digital banks now have a roughly 5 per cent share of the country’s 5 trillion yuan unsecured consumer loan market, and more than 7 per cent of loans to small and medium-sized enterprises, according to a report released in January by accounting firm McKinsey. SAMR’s decision to penalise AiBank’s shareholders was among a batch of more than 40 cases on which investigations had been concluded. Several other tech giants, including JD.com, Tencent, Baidu, ByteDance and Alibaba, were fined 500,000 yuan each for their violations.