Agricultural Bank Shuts Access to Online Lenders Because of RiskBloomberg News
The booming third-party payment industry is plagued with fraud
Regulator says 30% of peer-to-peer lenders are `problematic'
Agricultural Bank of China Ltd., the nation’s third-largest lender, ordered independent payment services to shut access to online lending sites in another blow to a booming business beset by failures and fraud.
Zhejiang Ebatong Technology Co., a third-party payment firm, said in a statement on Jan. 22 it would block payments from Agricultural Bank clients to peer-to-peer lenders by Jan. 26. The company said it was taking the step at the request of the Beijing-based bank, which cited risks associated with the online lenders. Access to P2P firms through Agricultural Bank cards has exposed the lender to risks and damaged its reputation, 21st Century Business Herald reported, citing the bank’s notice.
Last month China’s banking regulator pledged to “cleanse the market,” saying more than 1,000 online P2P lenders, representing 30 percent of the industry, are "problematic." The clampdown follows a stock boom fueled by leverage, including financing channeled through online lenders, and a subsequent bust. Police also investigated Ezubo, a website that raised billions of dollars from investors.
Agricultural Bank is the first lender break links to online payment services, according to Xu Hongwei, chief executive officer of Shanghai-based Yingcan Group, which tracks the country’s peer-to-peer loan companies.
"It could be a knee-jerk reaction following the lender’s own risk incident," he said.
Agricultural Bank last week reported a fraud over its bills business involving 3.92 billion yuan ($596 million) at the Beijing branch.
China had 2,612 online lending platforms operating normally as of November, with more than 400 billion yuan of loans outstanding, according to the China Banking Regulatory Commission.
— With assistance by Jun Luo