The People's Bank of China (NBK, the country's central bank) has issued new regulations for the financial sector, tightening requirements for capital reserves and risk management in companies. The new rules, which will enter into force on November 1, 2020, are intended for large public and private conglomerates, as well as Internet companies that control businesses that can carry systemic financial risks, writes The Wall Street Journal.
The rules will also apply to large companies whose financial assets, such as loans, account for 85% or more of the total assets.
Under the new regulations, companies owning two or more businesses in the financial sector will be classified as financial holdings. They will need to have a registered and paid-up share capital of at least 5 billion yuan ($ 731 million), the NBK said.
Ant Group Co., China's largest fintech company and operator of the popular payment service Alipay, which filed IPOs in Hong Kong and Shanghai last month, plans to comply with the new rules.
Alipay is used by more than 1 billion people in the PRC, and in the 12 months ended June 2012, the service processed 118 trillion yuan of transactions from users in mainland China.
Ant also operates an online lending platform that provides loans to individuals and businesses, sells insurance services and offers access to mutual funds. The mutual fund, which is managed by the Ant division, is currently the largest in China and covers about a third of the country's population.
Several of Ant's divisions, including its payments business, are already licensed by the NBK or Chinese regulators in the securities, banking and insurance sectors.
Listing documents released by the company last month said its subsidiary, Zhejiang Finance Credit Network Technology Co. – will apply for registration as a financial holding company and will include Ant's licensed financial services business.
As of June 30 of this year, Ant had 71.4 billion yuan in cash and cash equivalents.
Another internet company that will be affected by the new requirements is Tencent Holdings Ltd., which operates a major payment system and investment platform.
The NBK said in a statement that the new rules will “strengthen supervision and control over financial holdings created by non-financial companies and other organizations,” and will help protect the PRC from systemic risks.