China Bans Banks from Selling Depository Products via Third Party Online Platforms


Beijing has issued a new directive which further steps up pressure on the sale of depository products via online fintech platforms, after tech companies first began to remove them en masse at the end of last year.

On 15 January the China Banking and Insurance Regulatory Commission (CBIRC) and the People’s Bank of China (PBOC) jointly issued the “Notice on Items in Relation to Standardising Commercial Banks Using the Internet to Undertake Personal Depository Operations” (关于规范商业银行通过互联网开展个人存款业务有关事项的通知).

The Notice stipulates that “commercial banks cannot use Internet platforms that they do not operate themselves to undertake fixed deposit and time-demand deposit operations,” with such operations including “sales and promotion, product display, information transmission, purchase entry, interest rate supplementation and other services.”

The Notice further stipulates that outstanding depository products sold by commercial banks via third party online platforms will “be naturally settled upon maturation.”

Leading Chinese fintech players including, Du Xiaoman, Tencent and Ant Group’s Alipay first began to remove deposit products from sale via their online platforms in mid-December in response to demands from regulators.

On 15 December Sun Tianqi (孙天琦), head of the Chinese central bank’s financial stability department, warned that “the depository operations of online platforms are categorised as driving without a license, and shall be included within the scope of financial regulation.”

In November 2020 Sun, warned of risk in relation to the sale of depository products via online lending platforms by smaller lenders seeking to better access funds.

Sun referred to the phenomenon of banks selling deposit products via online platforms as “drinking poison to quench their thirst.”

“Some banks have seen rapid growth in the acceptance of deposits via online platforms,” said Sun at the “Digital Finance Regtech Exploration and Application Summit” (数字金融领域监管科技探索与应用研讨会). 

“Certain high-risk institutions are using online platforms to absorb deposits, and for some the share is already up to 70% of deposits. Other banks are depending upon platform deposits to supplement liquidity gaps, significantly replacing interbank financing.

“These high-risk institutions have comparatively weak ability to withstand risk, and an excessively high share of deposits from online platforms further increases the instability of their liabilities.” 

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