BEIJING (Reuters) – A boom in asset-backed securities issued by micro-lenders aiming to expand in China’s fast-growing online credit market looks set to slow this year amid growing regulatory scrutiny.
Micro-lenders have raised billions of dollars packaging consumer loans into securities for sale to institutional investors on China’s nascent market for asset-backed securities in order to rapidly expand their loan books.
Many of China’s largest internet and technology companies have issued securities backed by micro-loans. Ant Financial Services Group, an affiliate of Alibaba Group Holding (BABA.N), dominates the market and the finance arms of JD.com Inc (JD.O), Baidu Inc (BIDU.O), VIPShop Holdings (VIPS.N) and Xiaomi Technology have also raised funds through the products.
But the market for the securities is set to slow this year, industry sources say, as regulators target lenders’ high debt levels and limited asset disclosure.
Rules announced on Dec. 1 limited the amount of lending backed by the products the companies can make. They were also required to consolidate them on their balance sheets.
China’s exchanges and the National Association of Financial Market Institutional Investors (NAFMII) have suspended the issuance of securities backed by consumer loans by Internet-based micro-lenders, said Guo Yonggang, general manager of the structured financing department at Golden Credit Rating International Co.
NAFMII last week amended its disclosure requirements for consumer loan securities to reflect the central bank’s higher transparency standards.
The volume of securities backed by consumer…