The unit, registered in Chongqing, will be allowed to lend to individuals, issue bonds and borrow from domestic financial institutions, according to a notice from the China Banking and Insurance Regulatory Commission on Thursday.
The approval marks an important step in Ant’s overhaul as it transitions to become a financial holding company that will be regulated more like a bank. The new unit will allow Ant to continue with consumer lending, its most lucrative operation, though it’s unclear how it would affect the scale of that business.
“There are ambiguities but the importance is this is a step ahead,” said Shujin Chen, a Hong Kong-based analyst at Jefferies. The move will curb Ant’s ability to lend, but it’s yet to be seen whether regulators will allow it to continue to distribute loans for other institutions for a fee, she said.
Ant will now need to transfer its online lending operations and outstanding loans to the unit. Chongqing Ant Consumer Finance Co. will have registered capital of 8 billion yuan ($1.3 billion), and Ant will hold a 50 per cent stake.
China Huarong Asset Management Co. is also among the shareholders, with a 4.99 per cent holding. Other investors include Nanyang Commercial Bank Ltd, China TransInfo Technology Corp and Contemporary Amperex Technology Co.
The banking regulator said that Ant will need to comply with laws by fully disclosing borrowers, loan terms, annual interest rates and overdue loans. Ant will work with the other shareholders “to serve the needs of consumers, and to continue enhancing the quality of financial services and risk management capabilities,” a company spokesperson said in a text message.