After “Supervision Night”, where are the ants heading?

A company that has just received IPO tickets was simultaneously interviewed by four financial regulatory authorities on the eve of the bell. This is unique in China’s financial capital market. The Ant Group received the first order. On the evening of November 2nd, Ant Z Space, located at No. 556 Xixi Road, Xihu District, Hangzhou, was brightly lit as usual. It was a sleepless night, unlike the joy when the pricing was announced last week.

At 9:00 that night, the official WeChat account of the China Securities Regulatory Commission issued a message: “Today, the People’s Bank of China, China Banking and Insurance Regulatory Commission, China Securities Regulatory Commission, and State Administration of Foreign Exchange have supervised Ant Group’s actual controller Ma Yun, Chairman Jing Xiandong, and President Hu Xiaoming. Interview.”

About 25 minutes later, the official WeChat account of the China Banking and Insurance Regulatory Commission issued a message: “The China Banking and Insurance Regulatory Commission and the People’s Bank of China publicly solicit opinions on the “Interim Measures for the Administration of Online Small Loans (Draft for Comment)” (hereinafter referred to as the “Measures”). The small loan business referred to by the tightening of regulatory documents is one of the main businesses of Ant Group.

In just a few hours, the article “Four Ministries and Commissions Interviewed Ants” only received 100,000+ reads and over 10,000 likes in the official micro-reading of the CSRC.

That night, the central bank’s official media “Financial Times” re-issued an article pointing out that for large-scale Internet companies to conduct financial business, the construction and improvement of the regulatory framework for large-scale Internet companies should be accelerated, market access should be strictly enforced, and consumer rights protection should be strengthened to prevent data monopoly.

At 10 o’clock in the evening, Guo Wuping, director of the Consumer Protection Bureau of the China Banking and Insurance Regulatory Commission, issued an article in the media that “huabei” and “borrowing” infringe on consumers’ rights and interests deserve high attention.

In fact, during the day on the 2nd, there were already two major regulators in the financial sector, pointing directly to financial technology and financial innovation. One is that recently, Liu He, a member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and Director of the Financial Stability and Development Commission of the State Council (hereinafter referred to as the “Financial Commission”), presided over a special meeting of the State Council’s Financial Stability and Development Committee. “It is necessary to strengthen supervision and fully incorporate financial activities into supervision in accordance with the law.” One is that the governor of the Central Bank Yi Gang also stated at the Hong Kong Fintech Week that large technology companies have changed the rules of the game, but the protection of trade secrets and consumer privacy Protection is a great challenge.

“You know you are arbitrage, they also know you are arbitrage, you know they know you are arbitrage, they also know you know they know you are arbitrage, but you are not only still arbitrage, you also scold them.” The crowd ridiculed in the circle of friends.

The ant group under the supervision spotlight responded quickly. He told the reporter of Caijing that the actual controller of the Ant Group and the relevant management have accepted the supervision interviews of the major supervisory departments. Ant Group will thoroughly implement the opinions of the interview, and continue to follow the 16-character guidelines of “secure innovation, embrace supervision, service entities, openness and win-win”, continue to improve inclusive service capabilities, and promote economic and people’s livelihood development.

After "Supervision Night", where are the ants heading? 1

More than a week ago, on October 24th, Jack Ma’s comments on financial regulation at the Bund Financial Summit were very popular; now, the financial regulatory authorities have once again attracted the attention of Ant Group and financial innovation.

The dramatic reversal has once again heated up the attention of Ant Group, which is about to log in to A+H shares.

Wind data shows that as of the close of the market on the morning of the 3rd, 33 Ant Financial concept stocks rose more and less, only 4 of Langxin Technology, Giant Network, Xinpeng and Baida Group saw slight declines, and Yuxin Technology’s increase has exceeded 7 %.

The interviews with 4 institutions did not exert pressure on Ant H shares. This morning, the price of Ant’s H-share dark market remained at 116-120 Hong Kong dollars, a 45%-50% increase from the offer price.

Where does “strong supervision” come from?

The last time Ma Yun, the actual controller of Ant Group, gave a speech that shocked the financial circle 12 years ago. That year (2008) coincided with the financial crisis. He said at the annual meeting of Chinese business leaders held in Beijing that if the bank does not change, We will change the bank.

The golden sentence 12 years ago once stung the nerves of many bank leaders, but at that time, most banking practitioners did not take it to heart. Later, it turned out that the banking leaders were careless.

In 2009, Alipay launched the mobile terminal Alipay App five years after its launch. The next year it launched Quick Payment. In 2011, it launched a QR code payment product. At the moment when QR code payment is sweeping the world, Alipay has a third-party mobile payment The market share exceeds 50%.

In 2015, Ant Group launched two consumer financial products, Huabei and Boraibe. As of the end of June this year, the consumer credit balance including Huabei and Boraibe was approximately 1.7 trillion yuan.

A week ago, Jack Ma delivered another speech that shocked the financial circle of friends at the Shanghai Bund Financial Summit.

He said that the Basel Accord is like an “old-age club”. What it wants to solve is the problem of aging and complex system of the financial system that has been in operation for decades. China is not a financial systemic problem, but the risk of lack of a healthy financial system.

Although Jack Ma declared that he was a layman before his speech, the regulatory authorities responded quickly compared to commercial banks 12 years ago.

The four ministries and commissions interviewed what was the original intention of Ant Group. Close supervisors told the reporter of Caijing that the press release of the financial committee meeting naturally understood the truth. In their view, Jack Ma’s “exciting speech” actually made a low-level mistake. .

On October 31, Liu He, Vice Premier of the State Council, presided over a meeting of the Financial Committee, and proposed to respect international consensus and rules and fully incorporate financial activities into supervision in accordance with the law.

At the same time, the meeting of the Financial Committee emphasized that we must first implement the spirit of the Fifth Plenary Session, adhere to the principles of marketization, rule of law, and internationalization, respect international consensus and rules, and properly handle the relationship between the government and the market. Second, to encourage innovation and promote entrepreneurship, it is also necessary to strengthen supervision and fully incorporate financial activities into supervision in accordance with the law to effectively prevent risks.

On the day when Ant Group was interviewed by the four ministries and commissions, the Governor of the Central Bank Yi Gang stated frankly at the Hong Kong Fintech Week that large technology companies have significantly improved the level of financial services, especially in remote areas where service demand has improved, which is unimaginable before The popularity of technologies such as mobile payments and QR codes has changed the rules of the game. At the same time, Yi Gang pointed out that large technology companies have changed the rules of the game, but the protection of trade secrets and the protection of consumer privacy is a great challenge.

Guo Wuping pointed out that “The Basel Agreement has gradually evolved over decades, and the risks covered have expanded from credit risk to operational risk. After the financial crisis in 2008, liquidity risk control standards were added. Practices in various countries have proved that it has wide applicability. Therefore, From the perspective of preventing and controlling risks and protecting the property security of financial consumers, financial technology companies should gradually establish risk control measures such as capital and provisioning.”

However, a senior financial industry person told the Caijing reporter that Jack Ma actually opened the “lid” of some problems, but it is a pity that he himself is a party, and many people focus on the business of Ant Group. What Ma Yun revealed is actually a long-standing serious problem in the supply-side structural reform, that is, the imbalance between finance and the real economy.

“Undoubtedly, from a case-by-case perspective, the Ant Group must accept the current supervision, because ants are essentially using technology to do finance. The current supervisory practice is understandable. But from the perspective of the overall supply-side structural reform, we China’s financial system and financial supervision methods need to be reformed. It can be seen that Japan and South Korea have not done a good job in the reform of the financial sector. This has also become an important reason for their failure in reforms. We should learn from them.” Such as the Financial Research Institute Dean Guan Qingyou told Caijing reporter that from the perspective of financial security, ants must accept financial supervision. From the overall perspective of reform, finance and supervision must also be reformed.

Welcome to the norms before listing

Despite this, the Ant Group, which is expected to become the world’s largest IPO in history, still dare not underestimate the pressure of policy. Before this, analysts frankly admitted to the Caijing reporter that its (Ant Group) biggest challenge comes from policy.

The Ant Group’s prospectus also mentioned that the relevant laws, regulations, and rules of financial supervision are highly complex and constantly changing. For example, the recently released “Supreme People’s Court Amendments” Regarding Several Issues Concerning the Application of Laws in Trial of Private Lending Cases “Decisions”, “Interim Measures for the Administration of Internet Loans of Commercial Banks,” “Decisions on Implementing Access Management of Financial Holding Companies”, “Trial Measures for the Supervision and Management of Financial Holding Companies,” etc., which may increase the difficulty of the company’s compliance and increase the company’s compliance cost.

Guan Qingyou pointed out that the supervisory interview is a serious warning. If the person in charge of a brokerage firm is interviewed, the rating of the brokerage firm will be deducted points that year, which will seriously affect the rating and business development.

On the evening of October 26, the initial inquiry of Ant Group’s IPO was completed, and the final A-share issue price was determined to be 68.8 yuan per share, with a total market value of 2.1 trillion yuan. Earlier, many investment banks predicted that Ant Group would be valued at approximately RMB 2.5 trillion to RMB 3 trillion. For this reason, its total market value discount was approximately 20%-30%. Based on the IPO price, the Ant Group’s A+H share issuance is up to 260 billion yuan (including the initial issuance of new shares and the full exercise of the over-allotment option).

“Supervisory interviews and the management of online small loans will change the valuation logic of Ant Group.” Guan Qingyou believes that on the one hand, Jack Ma may have to adapt to the current financial regulatory framework. Internet e-commerce’s rapid rise in regulatory loopholes and vacancies cannot be used on financial platforms. If you succeed, you can also fail. On the other hand, the Ant Group already has the function of a national public platform in a certain sense, and its influence is very large. In the case of data confirmation and data income distribution split, government intervention may be a trend, and it will inevitably accept systematic and strict supervision.

The listing of Ant Group is imminent, and a series of regulatory actions still cause market concerns. Will the intensive combination of supervision affect its listing process? Will the stock price break after listing?

Regarding the impact of the listing process, senior investment banker Wang Jiyue believes that the answer is no. He told a reporter from Caijing: “This is a regulatory talk, not an administrative penalty, and it will not affect the listing process of Ant.”

The impact on stock prices is more controversial. Financial columnist Ji Shaofeng bluntly said: “The ants will break their hair soon.” Wang Jiyue believes that regulatory talks and related policy releases will have an impact on Ant Group’s stock price, but it may not be as big as some people think.

He further analyzed to the reporter of Caijing: “The regulatory talk itself will not affect the operation of ants. In the future, there may be some policies to regulate ants, which will have an adverse impact on the rapid expansion of ants, but the long-term and healthy development of ants is more guaranteed. Therefore, regulatory talks will not have much impact on post-IPO stock prices.”

Wind data shows that as of the close of the market on the morning of the 3rd, 33 Ant Financial concept stocks rose more and less. Only 4 of Langxin Technology, Giant Networks, Xinpeng shares and Baida Group experienced slight declines. Yuxin Technology has increased by more than 7 %.

The interviews with 4 institutions have not yet exerted pressure on Ant H shares. On the morning of the 3rd, the price of Ant’s H-share dark market remained at 116-120 Hong Kong dollars, a 45%-50% increase from the offer price. On November 2nd, Ant H shares conducted three dark market transactions, with transaction prices of 108 Hong Kong dollars, 115 Hong Kong dollars and 120 Hong Kong dollars, respectively, which were 35%, 43.75% and 50% higher than the issue price.

In fact, some authoritative people close to the central bank have expressed their concerns, “Ant Group is a private enterprise after all, but it serves so many users. If there is a big problem, the risk is actually concentrated on one person (Ma Yun). The impact or risk is completely uncontrollable. Why develop a digital renminbi? Considering the above issues, we must avoid the potential risks of Alipay and WeChat Pay.”

Ji Shaofeng pointed out that for the current financial technology companies, the introduction of new regulations (Reporter’s Note: “Measures”) requires serious reflection on themselves. I am doing finance or technology. How much of one’s own profits comes from the value of the mother’s ecology, how much comes from the risk premium of financial credit, what is the value and due return of real technology in it, and whether it can cover the investment in technology.

“First think about the profit model clearly, firmly stick to the bottom line of not taking credit risks that exceed your own capacity, build core technological capabilities, and create a sharing mechanism that releases risks outside the system. This is like billions of dollars. The scale of tens of billions is much more important. Don’t think about the road of increasing the scale of credit first to earn money and then raising the technology platform, because most of this is a road of no return. The larger the scale, the more difficult it is to adjust.” Ji Shaofeng Say.

Huabai, borrowed and under pressure

After the supervision of a series of combination punches, the first to bear the brunt is the leading products of the Ant Group-“Huabei” and “Baibei”.

Guo Wuping issued an article criticizing the three major chaos of financial technology infringing on consumer rights: First, financial technology companies use consumer behavior data to form excessive credit, and use scenario inducements to stimulate advanced consumption, causing some low-income people and young people to fall into debt traps ; The second is that fintech companies charge higher than banks, and are “universal but not beneficial”; third, some fintech companies have the problems of excessive collection and misuse of customer information and improper information management.

The article directly named “HuaBai” and “BaiBai”, saying that the core of “HuaBai” is not essentially different from the credit cards issued by banks, and “BaiBai” has no essential difference with the microloans provided by banks. It also emphasizes: “‘HuaBai” It’s basically the same as the bank’s credit card business, but the installment fee is higher than that of the bank, which is inconsistent with the concept of inclusive finance. In fact, it is’inclusive but not beneficial’.”

Compared with Guo Wuping’s sternly worded articles, the above-mentioned “Measures” have attracted more market attention.

At present, the Ant Group operates the business of “Huabei” and “Bianbei” through two microfinance companies, Chongqing Ant Small and Micro Loan Co., Ltd. and Chongqing Ant Shangcheng Small Loan Co., Ltd.. The “Measures” provide for the supervision of small loan companies in terms of business access, business scope and basic rules, operation management, and supervision and management.

Among the clauses that have attracted much attention include: clarifying that the main body of supervision of microfinance companies is the banking regulatory agency of the State Council; small loan companies shall not carry out online microfinance business across provinces without the approval of the China Banking Regulatory Commission; The registered capital of a small loan company shall not be less than RMB 5 billion, and it shall be a one-time paid-in currency capital; in a single joint loan, the capital contribution ratio of the small loan company operating online small loan business shall not be less than 30% ; The online micro-loan business license is valid for 3 years from the date of issuance.

After the “Measures” was released, the market had mixed reactions. Some believed that the document was directed at the Ant Group, while others believed that it should not be over-interpreted.

“The “Measures” was in fact soliciting opinions before. This time it was announced suddenly and the time was relatively short. It should be directed at the ants.” A person familiar with the supervision of small loans bluntly told the reporter of Caijing that the “Measures” Mainly for small loan companies. It should be noted that before the issuance of the “Measures”, the management measures for small loan companies should be implemented first, and the loan organization regulations are required as the upper law, but these have not yet been issued. The “Measures” have not been issued before, and it is precisely because the first two have not been officially released.

There is also a view in the market that the reason why Jack Ma made his remarks on financial regulation at the Bund Financial Summit was precisely because he had known the relevant requirements of the Measures. The reporter of Caijing noted that the impact of the Measures on Ant Group is mainly concentrated in the leverage ratio and joint loans.

“The “Measures” have a significant impact on the existing online small loan licenses, and will have a substantial impact on the Ant Group. The joint loan model will be reshaped.” Su Xiaorui, a senior researcher at the Gunny Research Institute, told the Caijing reporter, “Joint loan funding The ratio rule is very lethal, and it imposes strong restrictions on the behavior of some large technology companies to leverage their own capital to expand the scale of joint loans with a small proportion of their own capital.”

Wang Pengbo, a senior analyst in the financial industry, also told a reporter from Caijing that the most influential clause in the Measures is a restriction on the proportion of joint loans. “When the proportion of investment increases significantly, it may have a significant impact on the expansion of future business scale. (The same capital) the funds it can leverage in the future may be much lower than it is now, and the leverage ratio may be 10 to 12 times in the future. It is in line with the Basel Agreement’s management direction for bank risk control.”

There are also views that it is not necessary to magnify the impact of the Measures on the Ant Group. “Ant can completely transfer gold companies and online commercial banks, just like Weizhongdai relying on WeBank, but other small loan companies may be sad. After all, many have only one or more online small loan licenses. Go for joint loans.” A person from a licensed financial institution said bluntly.

In addition, Wang Pengbo told the reporter of Caijing that the impact of the Measures on the Ant Group is not entirely negative. “If according to the “Measures”, the operation threshold of many small and medium-sized online lending institutions will be raised in the future, but the demand still exists. This part of the demand can only be operated by an institution that still has the financial capacity after being regulated. This will be beneficial Market concentration.”

Zhang Xiaorong, dean of Deepin Technology Research Institute and former chief internet analyst of CITIC Securities, also believes that for Ant Group, the new net loan method is not all bad. “Some small companies that do not meet the requirements of the new online loan will not be able to play. The industry will be further concentrated and several oligarchs will appear. Those with financial licenses, large amounts of capital, and strong companies will survive.”

“For the ants, the set of numbers in Xinwangdai is fatal to them.” Zhang Xiaorong told a reporter from Caijing. The fatal figure pointed by Zhang Xiaorong comes from the new network loan regulations: in a single joint loan, the proportion of capital contribution of a small loan company operating an online small loan business shall not be less than 30%.

He further analyzed that Ant Group mainly relies on joint loans and loan assistance models. In June of this year, it has reached a loan scale of 2.15 trillion yuan. Some market views claim that only 2% of the on-balance sheet loans belong to Ant Group, and the remaining 98% are issued or securitized by cooperative financial institutions. Then, if the capital contribution ratio stipulated in the new network loan method is not less than 30%, this means that the capital of the Ant Group will be supplemented to 645 billion yuan with a scale of 2.15 trillion yuan. “This number will make the ants feel heavy pressure. It will not only greatly reduce the space for granting loans, but also reduce their profit margins.”

Zhang Xiaorong said that in the future, ants will have registered capital like banks, hand in deposit reserves and so on.

An observer pointed out that the unprecedented intensive voice of supervision to an institution seems to be aimed at ants, but as the flagship enterprise of financial technology and financial innovation, the voice of supervision also strongly indicates the rules of financial innovation and supervision. The direction of the financial technology industry.

Our reporters Yang Xiuhong, Zhang Xinpei, and intern Zhou Qing also contributed to this article