Guidelines offer support, risk control
Ten Chinese government agencies jointly launched guidelines on Internet banking on Saturday, which could boost the development of online financial activities and also lower risks, particularly in the area of online lending, analysts said.
The guidelines come at a time when the country's Internet banking industry is developing rapidly, and more and more people are engaged in online financial transactions, such as purchasing wealth management products via online platforms.
The government wants to encourage innovation in Internet banking platforms, products and services, in order to stimulate vitality in the industry, according to the guidelines.
The guidelines said that the government would help financial institutions to upgrade their traditional financial services with the use of Internet technologies. Internet companies will also be encouraged to engage in Internet banking businesses, such as setting up Internet-based payment mechanisms and lending platforms.
Leading Internet banking companies will also be urged to seek a listing in the domestic stock markets, and the guidelines called for the establishment of more investment funds that specialize in supporting Internet banking enterprises.
A member of the PR staff at Internet giant Tencent Holdings told the Global Times on Sunday that the guidelines are a "milestone" in the course of Internet banking development and will boost sound development of the industry.
"We are looking forward to further details," the staff member said.
A member of the PR staff at Alibaba Group, another Internet giant, told the Global Times on Sunday that the company is currently "studying the guidelines" and declined to give any further comments.
An employee at a Shanghai-based peer-to-peer (P2P) lending website, who wished to remain unnamed, told the Global Times on Sunday that the guidelines would provide a shot in the arm for many Internet banking companies, as it will now be easier for them to get financing from venture capital firms.
He also said the guidelines could ease companies' worries about getting listed.
"Many Internet banking companies have been a little intimidated by the recent wave of fluctuations in the stock market, but I believe the guidelines will restore their confidence in going public," he noted.
Zhao Xijun, deputy dean at the School of Finance at Renmin University of China, nevertheless cautioned that despite its rapid development, Internet banking has also led to certain problems, such as fraud.
The guidelines categorize online banking into different business sectors and place each sector under the supervision of a specific institution.
For example, the central bank is in charge of supervising the Internet payment business, while the China Banking Regulatory Commission will regulate the Internet lending business.
"This is a very cost-effective regulatory approach as the government doesn't need to establish a new regulatory authority specifically for Internet banking," Zhao told the Global Times on Sunday.
But Zhao said that the regulatory institutions should understand that Internet banking has its own characteristics and cannot be regulated on the basis of traditional methods.
"They should conduct research and find a regulatory method that suits the industry," he said.
The guidelines include measures intended to cope with risks in the industry, such as establishment of a mechanism for improved transparency, and formulating an education plan for online banking customers.
The guidelines also aim to curb risks in online lending. For example, when people make online transactions via lending websites, the websites must not keep the lenders' money, but should entrust it to qualified banking institutions, as a form of third-party supervision.
The P2P website employee said that the policy could make P2P a more reliable investment conduit.
"Nowadays, some P2P companies keep or even use lenders' money. If those companies fail, lenders have no way to get their money back. But the intervention from banks will protect the interests of ordinary lenders," he said.
According to a report on July 1 by P2P industry portal wangdaizhijia.com, the total volume of domestic online lending by the end of June had grown by more than 200 percent from the end of 2014 to about 209 billion yuan ($33.7 billion).
Li Daxiao, an analyst at Yingda Securities, said that online banking not only supplements the traditional financial sector, but is also a good example of innovation, which the government has highlighted in recent months.
