China’s banking regulator has tightened rules governing how online lending platforms fund their loans, a move that analysts say could hit the valuation of Jack Ma’s Ant Group, reported the Financial Times.
Under the rule changes announced over the weekend by the China Banking and Insurance Regulatory Commission, online lending platforms will have to contribute 30% of the funding for loans they offer in partnership with banks. The CBIRC will also cap how much capital commercial banks can commit to online lending in co-operation with tech platforms. The new rules will come into force next year.
Ant, which uses algorithms to determine the loans individuals are eligible for, is set to come under even more valuation pressure due to the new rules, experts said, reported the FT.
Wong Kok Hoi, the founder of APS Asset Management, said the rules were likely to force the current scale of fintech loans to “contract significantly” in China and the changes could force the companies to operate more like commercial banks. “Ant’s business model will need to be drastically revamped,” he said.