Banks barred from online deposits business via third-party platforms
Commercial banks will no longer be allowed to carry out online deposit business via third-party Internet platforms.
According to an announcement, jointly issued by the China Banking and Insurance Regulatory Commission and the People's Bank of China, banks must conduct online savings business in accordance with laws and regulations, and any attempt to “violate or circumvent relevant supervision” will not be tolerated.
Fixed-term deposit and term-current optional deposit business is barred from being distributed through banks’ non-self-operated Internet partners.
The regulation has come into place as the partnerships between banks and non-bank online tech platforms have bred potential risks for the banking system and violated customer data privacy, according to the top regulators.
Internet deposit products sold on various platforms were mainly provided by city commercial and private banks. In order to woo investors, the interest rates tended to be much higher than regular bank deposits, which violated the market interest rate pricing mechanism.
Also, attracting deposits through Internet platforms breaks through the geographical restrictions for locally incorporated banks. The stability of savings products sold on these platforms tends to be poor, which will pose challenges to banks’ liquidity management.
As such, banks are required to strengthen their business risk assessment and monitoring, and reasonably control the cost of liabilities. Local players should stick to their development orientation and serve customers in areas where they have physical branches and outlets, the notice said.
It also calls for better protection of the lawful rights and interests of consumers.
Business like making payments via third-party platforms will not be affected, according to the notice.
Existing holders of Internet deposit products can withdraw the money upon expiry or in advance, and their interest rates won’t be affected.
Yi Gang, governor of the People's Bank of China, said earlier this month they will strengthen the management of Internet platform deposits and non-local deposits in 2021, maintain the order of the deposit market, and stabilize the cost of bank liabilities.
May Yan, analyst and head of UBS China financial research, predicted in a media briefing held this Monday that regulatory tightening of the financial technology sector will be a key theme this year.
Areas such as interest rate ceiling, credit scoring business by Internet platforms and lending partnership between banks and fintech platforms could see more upcoming regulatory measures, she said.