Banking News
- China punishes 8 banks for slack supervision
Date: 20-Jun-2007 Sources: (Xinhua Online)
BEIJING, June 18 (Xinhua) -- The Chinese banking industry regulator said Monday it has punished the branches of eight local banks for failing to prevent two clients from misappropriating loans of 4.46 billion yuan.
The eight banks concerned are the Bank of Beijing, the Beijing branch of Bank of Communications and the Shanghai outlets of China Merchants Bank, Industrial and Commercial Bank of China, China CITIC Bank, Bank of China, China Industrial Bank and Shenzhen Development Bank.
Beginning 2001, China Nuclear Engineering and Construction (Group) Corporation (CNECC) obtained loans of more than 2.06 billion yuan from the Bank of Communications and the Bank of Beijing purportedly to build nuclear power stations. But in fact 87 percent of the money was used to finance its real estate subsidiaries and invest in the securities market, according to the China Banking Regulatory Commission (CBRC).
China Shipping (Group) Company also deceived banks about loans.
Starting in 2006, the company was granted 2.7 billion yuan of loans by outlets of the six banks listed above. It used 2.4 billion yuan of the funds to buy shares in the country's booming stock market.
In the CNECC case, 18 people from the Bank of Communications and the Bank of Beijing were punished and 12 of them were fined. The CBRC did not reveal the amount of the fine.
The Shanghai branch of China Merchants Bank was fined 1.69 million yuan for slack supervision in the case of China Shipping (Group) Company. The other five local banks concerned were each given a fine of less than 500,000 yuan.
The CBRC also disqualified some senior executives of the local banks.
Wang Zhaowen, spokesman of the Bank of China, said that the bank has retrieved its loan and will not be affected by the case.
The Bank of China has asked its branches to take stricter measures to prevent loans from being funneled into the stock market, said Wang.
A senior executive with China Industrial Bank said the money lent to China Shipping (Group) Company was first transferred to another bank before it was invested in the stock market.
'It is very difficult to have a clear map of capital flows,' said the senior executive, but added that if banks strictly follow procedures, such cases could be avoided.
The Chinese stock market has exploded since last year. In mid-June 2006, the Shanghai Composite Index stood at just 1540 points. On Monday, a year on, it closed at 4,253.35 points. Last Friday, the total value of the market stood at nearly 18 trillion yuan.
This year-long bull market has led to a frenzy of speculation. Today there are more than 100 million accounts on the Shanghai and Shenzhen markets.
The CBRC urged the whole banking industry to tighten management to prevent any new cases of illegal investment of bank loans in the stock market. (1 U.S. dollar=7.62 yuan)
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