China regulators have ordered online payment provider Ant Group to retreat from consumer loans and wealth management.
The financial technology offshoot of China e-commerce company Alibaba will need to reign in its monopoly over the country's online financial services sector, regulators warned in the aftermath of Ant's delayed dual listing in Hong Kong and Shanghai earlier this year.
"Ant needs to return to its roots," People's Bank of China vice Gov. Pan Gongsheng said late Sunday on the bank's official website.
Shares in Alibaba fell in price Monday in Hong Kong after Beijing publicly accused its payments arm of regulatory failings. The share price of Ant parent company Alibaba Group Holding Ltd. fell as much as 7.3% in early trading in Hong Kong - its lowest since July. They were last trading at HK$212.20 ($27.37) each - or down 7.0%. In New York the company's American depositary shares were down 13.34% and were projected to open Monday at $222.00 each.
The company's shares have fallen by more than 25% since late October - cutting its market capitalization by about $260 billion. The personal fortune of founder Jack Ma, once China's wealthiest person, has fallen from just under $62 billion to $49.3 billion, according to Bloomberg data.
Ant must develop stringent individual credit reporting capabilities that are compliant with laws and regulations while also protecting personal privacy, he said after meeting with company representatives.
According to the PBOC, Ant used regulatory arbitrage to sideline competitors and develop a monopoly over China's online financial services industry.
"The company has been urged to improve its corporate governance," Gongsheng said.
The banking authority has also encouraged the digital finance company to curb illegal activities among users by closely regulating credit, insurance and wealth management sectors.
Ant will launch a plan to tackle these issues in "a timely manner," the company said in a social media statement without elaborating.
The digital lending and banking company was set to debut in a dual initial public offering that was canceled in November by mainland regulators but would have become the world's largest initial public offering had it proceeded.
Last week, mainland authorities announced an antitrust investigation into Ant's parent company Alibaba Group, while the company will have to pay for failing to disclose the takeover of a competing department store chain in 2014.
But the China e-commerce group still has room to maneuver - to support the flagging price of shares, Alibaba raised a stock repurchase program from $6 billion to $10 billion early Monday Hong Kong time.
The program, effective through until the end of 2022, was initially launched earlier this quarter but failed to ignite interest from investors with the price of Alibaba shares hitting a six-month low.