In order to thoroughly implement the guidelines of the Fifth Plenary Session of the 19th Central Committee of the Communist Party of China (CPC), the Central Economic Work Conference convened at end-2020 and the ninth meeting of the Central Commission for Financial and Economic Affairs, also to further strengthen the regulation of Internet platform enterprises engaging in financial businesses, enhance anti-monopoly stance and prevent disorderly capital expansion, and promote the regulated, sound and sustainable development of the platform economy, financial regulators including the People’s Bank of China (PBC), the China Banking and Insurance Regulatory Commission (CBIRC), the China Securities Regulatory Commission (CSRC), and the State Administration of Foreign Exchange (SAFE) (hereinafter collectively referred to as financial regulators) had a joint regulatory talk with some Internet platform enterprises engaged in financial businesses on April 29, 2021. PBC Deputy Governor Pan Gongsheng presided over the regulatory talk. The actual controllers or representatives of 13 Internet platform enterprises including Tencent, Du Xiaoman Financial, JD Finance, ByteDance, Meituan Finance, DiDi Finance, Lufax, Airstar Digital Technology, 360 DigiTech, Sina Finance, Suning Finance, Gome Finance and Ctrip Finance attended the regulatory talk.
The financial regulators pointed out that in recent years, Internet platform enterprises have played an important part in making financial services more efficient and the financial system more inclusive, and in reducing trading costs, thus showing a sound growth momentum overall. Yet there are some serious irregularities, such as conducting financial businesses without license or beyond the scope of businesses stated in the license, operating with ill-established corporate governance mechanisms, or engaging in regulatory arbitrage, unfair competition, and infringement of consumers’ legitimate rights. The enterprises participating in the talk all have comprehensive businesses on a large scale and significant influence in the industry, and their problems exposed are quite typical. Therefore, they should be instructed to make rigorous rectifications in the first place. The financial regulators emphasized that financial businesses should primarily serve the real economy and prevent financial risks. Irregularities in financial business operations will be strictly scrutinized and punished according to laws and regulations.
The financial regulators made rectification requirements for the Internet platform enterprises in addressing pronounced problems prevailing in their financial businesses. The first is to bring all financial activities under financial regulation, and only licensed businesses are allowed. The second is to bring payment services back to its fundamental role, cut the improper connections between payment tools and other financial products, strictly control the expansion of non-banking payment accounts to the corporate sector, make transactions more transparent, and rectify unfair competition. The third is to break information monopoly and ensure that personal credit information business is conducted by licensed credit information agencies according to law. The fourth is to exercise better management over key links including shareholder qualification, ownership structure, capital, risk isolation and related-party transactions. Qualified enterprises should apply for the establishment of financial holding companies according to law. The fifth is to strictly follow prudential regulatory requirements to improve corporate governance, implement the requirement that “one investor as a major shareholder, along with its related parties and parties acting in concert, may either invest in no more than two banking or insurance institutions, or control no more than one banking or insurance institution,” carry out Internet deposit and loan businesses and Internet insurance business in a compliant and prudential manner, and prevent risks associated with online “mutual aid,” a type of micro-insurance program. The sixth is to regulate the issuance and trading of asset securitization products and the listing overseas. Professionals and senior management of securities and fund companies are prohibited from holding posts in related parties, so as to ensure the independent operations of these institutions. The seventh is to enhance the financial consumer protection mechanism, regulate the collection and use of personal information, as well as marketing and publicity practice and contracts in formatted texts, and strengthen the supervision and regulation of cooperation on financial businesses with third-party agencies.
The financial regulators required that during their self-examination and rectification, the enterprises should maintain normal operations and business continuity. The financial regulators will keep in close contact with Internet platform enterprises, remain fully open to their opinions, and inspect their rectifications in due time. Where an enterprise fails to make sufficient rectifications or commits violations during the period, they will be strictly investigated and punished according to relevant laws and regulations. The financial regulators will continue to place equal emphasis on development and regulation, and support the efforts of the platform economy to stay in the right course and promote innovation while securing steady progress. They will hold fast to the Two Unwavering Commitments, protect property rights according to laws and regulations, promote entrepreneurship, energize market entities and sci-tech innovation, facilitate the platform enterprises to continuously improve financial services and consolidate and strengthen their international competitiveness. Meanwhile, the regulators will stay committed to strict and fair regulation, enforce “zero tolerance” policy on all types of illegal or irregular financial activities, protect data property rights and personal privacy, and resolutely safeguard a financial market order with fair competition.
According to the participant enterprises, they will attach great importance to self-examination and rectification, and, under the guidance of the financial regulators, align their rectification plans with the financial regulatory requirements and ensure earnest implementation of the plans. While sparing no efforts to ensure the compliance and continuity of financial businesses, they will commit themselves to the fundamental task of serving the real economy and the people, further enhance the sense of social responsibility, and safeguard an enabling market environment for fair competition.
