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China's central bank orders payment platforms to hand in customer provisions

Xinhua, January 13, 2017 Adjust font size:

China's central bank has ordered third-party payment platforms to put part of their customer provisions in specific official accounts to reduce financial risks.

From April 17, non-bank payment institutions such as Alibaba's Alipay should put some of their customers' stock fund into specific accounts in designated institutions with no interest paid, according to a statement released by the People's Bank of China.

Customer provisions are money that clients pay in advance to payment platforms for certain services and are often used by these platforms for their own profit.

Payment institutions should put 12 percent to 24 percent of total customer provisions into the designated accounts in line with their services. This will not cause liquidity problems, according to the statement.

The new order aims to defuse financial risks as customer provisions may be earmarked by payment companies for high-risk and illegal practices, the statement said.

A total of 267 payment institutions had customer provisions totalling over 460 billion yuan (66.7 billion U.S. dollars) by the end of September, randomly deposited across many accounts generating liquidity squeeze risks. Endi