Chinese financial services and technology firm Ant Group said on Sunday it will establish a “rectification” working party and implement regulatory requirements in full, in a statement issued after a meeting with financial regulators.
Hours earlier, China’s central bank vice-governor Pan Gongsheng said regulators had urged Ant to outline a rectification plan and a timetable as soon as possible to meet regulatory demands.
In its statement on social media, Ant said it would set out the plan and timetable in a timely manner, without saying exactly when new steps would be implemented.
The Chinese government has begun taking a harder line toward big internet companies, which have come to wield vast influence over segments of the economy much like Facebook Inc., Google and other tech giants have done elsewhere. China’s market regulator recently opened an anti-monopoly investigation into Ant’s sister company, the e-commerce behemoth Alibaba Group Holding Ltd. Alibaba is the other pillar of the business empire built by Jack Ma, China’s richest man and best-known tycoon.
Ant’s Alipay platform began as a payment service for Alibaba’s online shopping sites, but it has since grown to help its 730 million monthly users take out small loans, invest their savings and buy insurance. Alipay’s growth had put Ant on course to hold the world’s largest initial public offering. It also prompted authorities to look at whether Ant was benefiting improperly from facing less oversight than traditional financial institutions.
Officials from four financial watchdogs, including the central bank, met with Ant on Saturday, the agencies said. On Sunday, Mr. Pan described what had been discussed in the form of a written question-and-answer session that made clear the regulators’ intense displeasure with the company.
Mr. Pan listed what he said were Ant’s main problems. Its corporate governance was “not sound,” he said. It was “indifferent” to the law, “looked down” upon compliance requirements and engaged in “regulatory arbitrage.” It took advantage of its dominance, Mr. Pan said, to exclude rivals. And it harmed consumers’ interests.
The regulators have ordered Ant to “return to its payment origins,” Mr. Pan said, and to “strictly rectify illegal credit, insurance and wealth management financial activities.” Such demands could portend that the agencies will ask Ant to spin off those business lines, which have been increasingly important to its revenue.
Mr. Pan also said the regulators had ordered Ant to reorganize itself to ensure that it met capital requirements. Keeping more money on its books to back its lending activities could crimp Ant’s bottom line.
Regulators in China have played give-and-take with Ant for years. When the company created a money-market fund within Alipay that paid higher rates than bank deposits, the government forced the fund to shed risk and lower returns. After Ant began managing huge amounts of money in Alipay virtual wallets, the central bank made it park those funds in special accounts where they would earn minimal interest.
In a statement, Ant said it would put together a plan for complying with the new requirements.
“We appreciate financial regulators’ guidance and help,” the statement said. “The rectification is an opportunity for Ant Group to strengthen the foundation for our business to grow with full compliance.”
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