China Slams Xiaomi-Backed XW Bank Over Violations

China’s banking regulator lashed at an online lender backed by Xiaomi Corp. over a range of violations, in the latest sign of intensifying scrutiny on the financial operations of the nation’s technology behemoths.

Sichuan XW Bank Corp, one of China’s three internet banks, was found to charge interest rates of as high as 30% on consumer loans with an auto financing platform, and that it failed to follow risk assessment and debt collection regulations, the China Banking and Insurance Regulatory Commission said in a statement on Thursday.

The admonishment came after consumer complaints against the lender have increased significantly since the end of 2019, the regulator said. While no punishment was immediately announced, the CBIRC stressed that all banks and insurers should conduct self-investigation into their cooperation with third-party platforms and protect consumers’ rights.

China has recently escalated a campaign to curb the influence of its technology moguls after the top leadership pledged to expand oversight of financial technology, stamp out monopolies, and prevent the “unregulated” expansion of capital. A progression of rules unveiled in the past six months has taken aim at the dominions built by China’s most successful online entrepreneurs with the first blows falling on Jack Ma when Ant Group Co.’s $35 billion initial public offering in November was torpedoed at the last minute.

The CBIRC on Wednesday also prohibited online platforms from lending to college students.

Founded in late 2016 by a group of private conglomerates, XW Bank, along with Ant’s MYbank and Tencent Holdings Ltd.’s Webank Co., operates without any brick-and-mortar branches. New Hope Group holds a 30% stake as the largest shareholder, followed by Xiaomi with a 29.5% stake via an unit. The bank had 44 billion yuan ($6.8 billion) of assets by the end of 2019, according to its annual report.

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