“If you mess with the bull, expect to get the horns”. So says American folklore – Jack Ma and his Ant group should have listened to the proverb.
In just three short month, the PBoC’s chief antagoniser has had his $37 billion IPO iced and has now been forced to break up financial arm of the group to become exactly what he railed against – a financial holding company or, in China, a Bank.
Ant Group reached the deal with Chinese regulators to restructure its business after they raised issues that halted the IPO, according to several people familiar with the situation.
The proposed restructuring will involve Ant placing all of its major businesses, including its technology units, inside a financial holding company to comply with a new regime implemented by the People’s Bank of China in November.
The change, which is likely to be announced before the Chinese new year holiday begins on February 11, according to two of the people familiar with the process, will leave China’s largest mobile payments company subject to stricter capital requirements, making it more like a bank than a tech company.
Chinese regulators, with the agreement of President Xi Jinping, suspended Ant’s IPO, about a week after Mr Ma gave an ill-timed speech criticising China’s state-owned banks and regulators.
A person close to the company, who declined to be named, said it would take several months to complete the overhaul. “Business will definitely be impacted,” he added. “The actual impact will depend on how strictly we follow the new online lending rule.”
Another person close to the situation said he did not expect regulators to sign off so quickly after Ant submitted its restructuring plan. But “that’s China”, he added.
Beijing had flagged its intention to require companies such as Ant to establish financial holding companies in September with the announcement of new regulations, a year after draft rules for such companies were made public.
Ant is likely to need to raise capital to satisfy the PBoC rules for financial holding companies, which, along with requirements on capital adequacy, risk control and governance, make the holding vehicles more like a bank.
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