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Jack Ma summoned by China's regulators on eve of Ant Group debut

China has been tightening rules and imposing capital demands on the sprawling financial operations of conglomerates such as Ant in an attempt to curb risks to its $49 trillion financial industry

Jack Ma

Bloomberg News 

Jack Ma
Jack Ma during a Bloomberg Television interview

Four Chinese regulators including the central bank and banking watchdog called billionaire and Ant Group Co.’s top executives to a rare joint supervisory interview on Monday, underscoring rising government scrutiny of the company before its stock-market debut.

Ant Chairman Eric Jing and Chief Executive Simon Hu were also at the meeting, which included the China Securities Regulatory Commission and State Administration of Foreign Exchange, according to a statement on Weibo. No further details were disclosed in the statement.

The Chinese financial services giant, which spans payments, lending, asset management and insurance, was told it will be treated as a financial holding company and subject to regulations regarding capital and leverage similar to banks, according to people familiar with the matter. Senior executives will be under increased scrutiny, they said, asking not to be identified as the discussions are private.

The central bank, banking regulator and CSRC weren’t able to comment outside regular business hours.

“Ant Group will implement the meeting opinions in depth,” the company said in a statement. It will follow guidelines including stable innovation, an embrace of supervision and service to the real economy, it said.

China has been tightening rules and imposing capital demands on the sprawling financial operations of conglomerates such as Ant in an attempt to curb risks to its $49 trillion financial industry. The Hangzhou-based company has been hit with a series of fresh rules in recent months, including capital and license requirements, a cap on loan rates and limits on its use of asset-backed securities to fund quick consumer loans.

The latest move from regulators comes days before Ant’s trading debut following the world’s largest initial public offering, which is poised to raise $34.5 billion. It values the company at about $315 billion based of filings, more than JPMorgan Chase & Co. The sale vaults Ma’s fortune to $71.6 billion, topping the Walmart Inc. heirs.

The IPO has attracted interest from some of the world’s biggest money managers, and is sparking a frenzy among individual investors in China. Institutional investors in Hong Kong are buying Ant shares at a 50 per cent premium in the gray market, people familiar with the matter said on Monday, signaling it’s poised to soar when it starts trading on Nov. 5.

Separately, China’s banking regulator proposed tougher rules for small online lenders late Monday, including imposing a cap on the amount of loans to be offered to individual borrowers as well as the leverage level.

The draft rule could deal a major blow to Ant as it requires an online loan facilitator to provide at least 30 per cent of the funding they jointly lend with banks. Ant said in its prospectus that currently about 2 per cent of 1.7 trillion yuan ($254 billion) of loans it facilitated as of June were on its balance sheet. The company declined to comment.

Ant is the parent of Alipay, a payments service spun out of Alibaba Group Holding Ltd.

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First Published: Tue, November 03 2020. 01:29 IST