Ant stops sale of $ 3 billion in loan-backed securities after crackdown
SHANGHAI – Ant Group has abandoned its sale of 18 billion yuan ($ 2.8 billion) of loan-backed securities online, apparently in response to China’s growing crackdown on lucrative consumer credit business fintech heavyweights.
Plans for the float, which was to be carried out by two Ant subsidiaries, were approved by the Shanghai Stock Exchange last fall. The Shanghai Stock Exchange gave no reason to suspend the sale when it broke the news on Tuesday.
Asset-backed securities are a key part of Ant’s smartphone microfinance business model, whose lending assets have grown to 2 trillion yuan. Although most of the funds are provided by partner banks, the subsidiary of Alibaba Group Holding manages part of the credit independently. Ant recovers its contribution by repackaging the debt into asset-backed securities which are then sold.
If Ant stops issuing asset-backed securities, the group would find it difficult to expand the consumer credit business as it bears more credit risk associated with loans.
Chinese authorities are increasingly vigilant about the financial risks posed by the growth of mobile credit. Not only did the government suspend Ant’s November debut on the stock market, but a series of rules restricting the issuance of asset-backed securities came into force.
Ant has indicated that he will cooperate fully with regulatory oversight bodies. The company has tightened credit to microenterprises since the spring.