China’s central bank chief said that Ant Group Co. could resume its operations for an initial public offering once problems are resolved. This has brought relief to global investors that seek signs of what the future holds for the world’s largest fintech giant.
Yi Gang, People’s Bank of China Governor said that agencies are still investigating problems related to monopolies at Ant financial IPO. He also said that regulators require a clear legal framework to resolve the issues.
Moreover, Chinese regulators are requesting Ant to create a timetable to overhaul its business after suddenly halting of its US$35 billion IPO in November.
While regulators halted short of directly requesting for a breakup of the company, the central bank stresses Ant for some actions. That includes requiring Ant financial IPO to “understand the necessity of overhauling” and generating a timetable as soon as possible.
Yi brought a message that Ant has avoided a worst-case scenario where it requires to close down businesses completely. Apparently, shares of Alibaba rose 3.9% on Wednesday morning in Hong Kong.
Pan GongSheng, PBOC Deputy Governor has mentioned some information in an op-ed in the Financial Times on Wednesday. He said that regulators are trying to achieve a balance between preventing financial risks and encouraging fintech innovation.
He wrote that network effects mean that “winner-takes-all” outcomes often occur in fintech competition, including market monopolies and unfair competition.
Uncertainties for Ant financial IPO’s businesses
Apparently, some uncertainties remain for several of Ant’s businesses, like crowdfunded health-care, consumer loans and payments. Actually, any non-bank payment company with half of the market in online transactions may subject to antitrust probes.
The central bank can recommend the cabinet to impose restrictive measures if a monopoly is confirmed. The restrictive measure includes breaking up the entity by its business type. Besides, firms with payment licenses would have a one-year grace period to cope with the new rules.
Last week, China’s insurance and banking regulator said that it would analyze the risks of internet companies’ crowdfunding healthcare operations and take necessary actions. On the same day, Xinaghubao, the chief architect of Ant Group’s healthcare business resigned.
Meanwhile, Ant’s consumer loans business requires more capital to stick to draft rules that place stricter requirements on lending units.
Bloomberg Intelligence analyst Francis Chan estimated that Ant needs to invest at least 70 billion yuan of new capital business. That estimation is based on draft rules that require Ant to co-fund 30% loans, with five times maximum asset leverage.
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