Chinese banking regulator berates Xiaomi-backed online bank XW Bank for charging 30% service fee on consumer loans

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China’s banking regulator has issued a warning against an internet lender only backed by Xiaomi for breaking the country’s lending rules, as it steps up its scrutiny of financial firms by technology platforms.

The verbal reprimand follows complaints from borrowers against the lender, which have increased significantly since late 2019, the regulator said. The regulator did not impose any fines or sanctions on the bank, but stressed that all banks and insurers should review their own operations, especially when it comes to cooperating with third-party platforms.

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China recently stepped up a campaign to limit the influence of the country’s top tech champions after senior management pledged to expand fintech oversight, eliminate monopolies, and prevent unsuccessful expansion. regulated capital. After the financial regulator thwarted Ant Group’s initial public offering of $ 35 billion, antitrust and banking regulators issued a litany of rules to lock down fintech companies to reduce any potential risk to the country’s financial stability .

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Until recently, fintech companies had the flexibility to move, allowing lenders in China’s shadow banking system to become some of the most valued companies in the world. These “big technology companies”, including JD Digits, Lufax, Group of ants, have become the top brass of Chinese non-bank lenders, attracting big checks from international investors. Ant is a subsidiary of Alibaba Holding Group, who own South China Morning Post.

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XW Bank, which stands for “New Internet Bank,” was one of several online lenders approved in recent years to lead China’s fintech experimentation. With Ant’s MYbank and Tencent Holdings’ Webank, XW Bank operates without any physical branch, just like the eight virtual banking licenses issued in Hong Kong.

XW Bank’s largest shareholder is New Hope Group, a Sichuan-based feed meal producer, with a 30 percent stake. Xiaomi, which makes smartphones and a line of household electronic gadgets, holds 29.5% via one unit. The bank had 44 trillion yuan ($ 6.8 trillion) in assets at the end of 2019, according to its annual report.

This article was originally published in the South China Morning Post (SCMP), the most authoritative voice on China and Asia for over a century. For more SCMP stories, please explore the SCMP application or visit the SCMP Facebook and Twitter pages. Copyright © 2021 South China Morning Post Publishers Ltd. All rights reserved.

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