Watchdog says rules apply to fintech too
While Internet platforms and other financial technology companies are being encouraged to make business innovations, they should obey the same rules and regulations that apply to traditional financial institutions, China’s top banking and insurance regulator said on Tuesday.
Internet players have been active participants in China’s financial industry, the largest in scale and scope in the world, and have greatly enhanced the country’s financial inclusion, especially in terms of providing digital credit, digital insurance and other services to small and medium-sized enterprises, Guo Shuqing, chairman of the China Banking and Insurance Regulatory Commission, told a press briefing.
“Many innovative practices are world leading and we encourage these innovations,” he said.
At the same time, however, financial business in any format should be managed in accordance with corresponding rules, regulations and laws, and there can be no exceptions, the watchdog said.
The development of Internet banks, such as MYbank under Ant Group, WeBank affiliated to Tencent, and XWBank in Sichuan, are encouraged, but unified supervision will be implemented on new entrants and established players.
“We don't think there are any restrictions or financial services that they are not allowed to develop,” Guo said, adding that any financial business these Internet players do such as insurance, trust and leasing must be supervised by the same rules for the whole industry.
“I believe that after such requirements are adjusted, these institutions will adapt well and develop healthily,” he said.
Sufficient capital is also required for any Internet platforms, be they banks, small loan companies or consumer finance firms, just like other financial institutions, according to the commission.
As long as they are engaged in the same financial undertakings, financial technology companies should obey the same capital adequacy ratio requirements.
“Considering some historical reasons, we have given them a grace period to make adjustments on their business,” Guo said.
Since the second half of 2020, Chinese authorities have published a number of regulations to strengthen regulatory requirements for fintech activities, an area which had grown rapidly but was previously lightly regulated.
These new regulations focus on business substance over form and the authorities have broadened the policy framework to cover all participants involved in financial activities, aligning regulations and business standards between financial institutions and fintech companies conducting similar financial activities, Moody’s Investors Service said in a recent report.
This holistic approach will allow regulators more flexibility to accommodate rapidly evolving fintech innovations, according to the study.
