China’s Banking and Insurance Regulatory Commission (CBIRC) and the Central Bank on Friday announced that it will ban commercial banks from selling deposit products through third-party internet vendors, like Alipay, WeChat Pay, JD Financial, and Lufax, after these platforms moved to clean out their stores from this type of products last month.
The tighter regulation of China’s fintech sector is set to “strengthen the supervision and management of commercial banks’ personal deposit business through the internet, maintain market order, prevent financial risks, and protect the legitimate rights and interests of consumers,” according to the official announcement, which was released to the public on Friday.
Internet deposit products have initially been launched by commercial banks with the help of online platforms that count a large userbase. They have been an important source to attract clients, especially for small banks, which have been luring clients with higher interest rates.
However, the business has exposed some risks and was allegedly violating relevant regulatory provisions and requirements of the market interest rate self-regulatory mechanism, breaking regional restrictions of local banks, and creating challenges to the liquidity management of commercial banks, the CBIRC said in a separate note.
Last month, online financial service providers, including Ant Group, JD Digits, Tencent, Baidu, Lufax, and Trip.com, all stopped selling deposit-taking products, after Sun Tianqi, the Central Bank’s newly appointed financial stability director, said at a conference that proxy sales of bank deposit products on third-party internet platforms are illegal financial activities.
The fintech sector is bearing the brunt of Beijing’s recent antitrust move and tightening regulations on the industry. Regulators aim to get a firmer grip on the country’s financial system, while the Central Bank is moving forward with plans for a digital currency, also known as digital yuan.