CBIRC and PBoC recently formed guidelines for commercial banks to conduct individual deposits businesses via the internet, and will publish related information to the public afterward, according to a CBIRC official, as reported by Caixin on December 31. The official indicated that CBIRC will support the development of the internet deposits business, while commercial banks should obey three principles, which are complying with regulations, strengthening risk management, and protecting consumer rights.
The internet deposits business refers to deposits products that commercial banks sell on internet platforms, which have several common features, such as flexible withdrawals, high interest rates, and low thresholds. In the past two years, a lot of banks launched their deposits products on internet finance platforms, mainly small and medium-sized banks. Leveraging this, some small banks could increase their fixed time deposits and ease their liquidity pressure, while internet finance platforms could obtain users and commissions.
However, at the fourth China Internet Finance Forum on December 15, 2020, Sun Tianqi, Director of Financial Stability Bureau under PBoC, highlighted the fact that the internet deposits business is unlicensed, allowing for illegal financial activities, and should be included under the scope of financial supervision. For instance, regional banks could absorb deposits from individuals across the country via internet finance platforms, violating geographic restrictions on regional banks. Some banks lift interest rates in non-transparent methods, such as shortening interest payment periods and returning money. Such platforms do not even hold related licenses to conduct internet deposits businesses. After Sun’s speech, 32 internet finance platforms, including Alibaba’s [BABA:US] Alipay, Tencent’s [0700:HK] LiCaiTong, JD.com’s [JD:US] JD Finance, Baidu’s [BIDU:US] Du Xiaoman Financial, DiDi Finance, and Lufax Holding [LU:US], removed their banking deposits products in December to comply with regulatory requirements.