Wu Xiaoling: Internet finance supervision should distinguish between "financial activities" and "activities serving financial services"

Wu Xiaoling: Internet finance supervision should distinguish between "financial activities" and "financial services activities"_First Financial Daily

"While the term 'Internet finance' brings convenience to our lives, it should not be tainted by irregular behavior." On July 10, Wu Xiaoling said this at the First China Fintech Conference 2016.

Wu Xiaoling believes that this year is the year of rectification and supervision of Internet finance. Whether it is Internet finance or financial technology (fintech), its essence is the application of information technology in the financial field, and it has not changed the essence of financial business.

Wu Xiaoling said that financial activities and "activities for financial services" should be distinguished and different regulatory principles should be implemented. If it is a financial activity, capital intermediaries and credit intermediaries must be managed with licenses. However, there are many financial services around financial activities, and these two types of financial activities should have different regulatory rules.

How to distinguish supervision?

According to the "2015 China Online Lending Industry Blue Book", a total of 1,263 problematic platforms have been exposed in the P2P online lending industry to date. Among them, 896 problematic platforms were exposed in the online lending industry in 2015, accounting for 70.94% of the historical cumulative number and 3.26 times that of 2014.

Recently, as the special rectification work on Internet finance led by the central bank has been launched across the country, Internet finance companies have ushered in a regulatory winter in 2016.

Wu Xiaoling believes that for fund intermediaries, the application of Internet technology will not change the risk feature that the asset pool of fund intermediaries that "guarantee principal and interest" is actually deposits. As long as it is "guarantee principal and interest", he has converted the rights and liabilities, which is essentially a deposit. In order to be responsible to depositors, there must be regulatory requirements for capital adequacy ratio.

When regulatory authorities are rectifying illegal finance, combating illegal fund-raising is the most important part. To combat illegal deposit-taking, fund intermediaries must be brought under supervision.

As for credit intermediaries, Wu Xiaoling also made it clear that if Internet finance acts as a credit intermediary and the recommended products cannot guarantee the full, true and complete disclosure of information, it will also affect investors. Therefore, such credit intermediaries also need license management.

Wu Xiaoling further stated that in the process of Internet finance supervision, financial activities and "activities for financial services" should be distinguished and different supervision principles should be implemented. If it is a financial activity, financial intermediaries and credit intermediaries must be managed with a license; but there are many financial services surrounding financial activities, and these two types of financial activities should have different regulatory rules.

In addition, Wu Xiaoling also defined the recently popular "Quick Chain Finance". She believes that the application of information technology in the financial field will not subvert the essence of finance. The digitization of currency or digital currency must be rooted in the needs of transactions and investment and financing. Therefore, the currency based on blockchain technology will face the same problems as the central bank system. The application of blockchain technology in the financial field may not be currency creation but value transmission and public ledger.

The credit reporting industry will face a shock

Wu Xiaoling pointed out that with the application of big data in the development of Internet finance, attention should be paid to the protection of citizens' data information and data property.

In April 2016, the European Union announced the EU General Data Protection Regulation to replace the Data Protection Directive that came into effect in 1995. It points out that the rights of data subjects include transparency, right to be informed, right to be available, right to be corrected and right to be forgotten, right to object, right to refuse automatic imaging, and infringement of rights.

The right to automatic profiling and social credit investigation have attracted much attention from Internet financial credit investigation. According to the EU General Data Protection Regulation, the so-called right to automatic profiling refers to any activity that processes personal data by automated means, which serves to evaluate specific aspects of an individual, or specifically analyzes and predicts specific aspects of an individual, including work performance, economic status, location, health status, personal preferences, trustworthiness, etc.

Obviously, according to the EU data protection regulations, every individual has the right to refuse automatic profiling, which will improve the lending and risk control systems of a large number of financial companies that rely on personal profiling technology as their core competitiveness. "Refusing automatic profiling may pose certain challenges to our credit reporting in the future," said Wu Xiaoling.

Wu Xiaoling pointed out that financial institutions and credit reporting agencies can inquire about personal information related to customers' economic activities, such as current account information, water and electricity bills, provident fund payments, e-commerce and other information. The ownership of this data includes the right to refuse automatic profiling and the right to data portability. These two rights are closely related to the cost of credit reporting.

Wu Xiaoling also said that the second draft of the Cybersecurity Law is currently soliciting opinions. According to her, according to the second draft, network operators should establish and improve a user information protection system, and the collected user information must be kept strictly confidential. The use of citizens' personal information should be publicly collected. Network operators shall not disclose, tamper with, or destroy the citizens' personal information they collect, and shall not provide citizens' personal information to others without the consent of the collected person. However, this does not apply to information that cannot identify a specific individual and cannot be copied.

Wu Xiaoling said that once the law is passed, the current domestic Internet financial credit reporting field, the bulk sale of personal service information on the Internet will be subject to certain restrictions. Credit reporting should follow the principle of rights protection, prevent and stop infringements such as unauthorized, compulsory authorization, one-time lifetime authorization, etc.