Industry Research Comments|Li Nan:Appropriate regulation is needed to separate diﬀerent functions of the FIs to refrain from the over-risk-taking behaviour
Ant Group, the ﬁntech aﬃliate of Alibaba Group Holding Ltd, is to restructure as a ﬁnancial holding company, China’s central bank said on Monday. Ant has formed a “comprehensive and feasible restructuring plan,” at the urging of ﬁnancial regulators, the People’s Bank of China said.Last November, regulators halted Ant’s planned $37 billion stock listing, days before it was due to list in what would have been the world’s largest IPO.
Nan Li commented on this matter. Nan Li, assiciate professor of finance,Anati economics and management college,Jiaotong University,Shanghai.She is also a member of Antai China banking research team , Institute of Industry Research (IIR)Industry Research in China.
“The regulatory talk on April 12, 2021, is not a surprise at all to me. The nature of ﬁntech is to apply information technology to improve the eﬃciency of ﬁnancial intermediation, whose fundamental special role in the economy is to channel the fund from net savers (households) to net users (corporations),she said.
“To diversify and enjoy the economics of scale, the FIs need to get big. Hence, ﬁnancial regulation is necessary to monitor the monitor so that the FIs do not take advantage of households and corporations based on their sheer size.
Moreover, appropriate regulation is needed to separate diﬀerent functions of the FIs to refrain from the over-risk-taking behaviour of FIs that may arise due to conﬂict of interests and moral hazard.
“This is why the payment services should be separated from the credit services (Huabei and Jiebei). This is also why the adequate capital ratio is imposed on any ﬁnancial institution, including Ant Group.
“This is also why the data of consumers and producers collected from payment services and clearing houses should be under the oversight of the central bank instead of kept in the hands of private parties.”