(Yicai Global) July 13 — Chinese banks were fined CNY1.1 billion (USD163.6 million) by regulators in the first six months for a string of offences, most of which had to do with the unlawful redirecting of loans into the property market and anti-money laundering breaches, according to the latest data.
The banking sector racked up 3,856 penalty notices from the People’s Bank of China, the China Banking and Insurance Regulatory Commission and the State Administration of Foreign Exchange, far more than the insurance and trust sectors, according to corporate data platform Qyyit, developed by Shanghai Great Wisdom.
The Industrial and Commercial Bank of China, the country’s largest lender, was also the biggest offender, accumulating penalties of CNY62.7 million (USD9.3 million), followed closely by the Agricultural Bank of China with CNY61 million. The Agricultural Bank of China was served the most notices at 219.
Bank of China, China Construction Bank and China Minsheng Bank as well as smaller lender Qingdao Rural Commercial Bank were each fined between CNY30 million (USD4.5 million) and CNY45 million.
Internal controls are generally lacking, a banking insider said. Many banks have backward risk control systems which badly need upgrading.
The illegal redirecting of loans into the property market was a common offence. Real estate transactions should be simple and transparent but “if some developers tamper with their account data, it is hard for banks to monitor how the money is being used,” an executive at an urban lender told Yicai Global.
And sub-standard anti-money laundering control was another frequent violation. Some banks failed to report large and suspicious transactions, did not confirm the identities of transfer recipients and set up accounts for clients using false names. Earlier this year, the PBOC fined the Agricultural Bank of China’s branch in Chongzuo, southwestern Guangxi Zhuang Autonomous region CNY11.4 million, the highest single penalty for failing to stop money laundering so far this year.
Rural commercial banks, which are small in size and mostly serve rural areas, were the type of lender that committed the most offences. Such banks were fined CNY270 million (USD40 million) and received 1,105 penalty notices, followed by big state banks at CNY234 million, joint-stock banks at CNY207 million and urban commercial banks at CNY177 million.
Smaller village and township banks did not escape lightly. Some 196 such banks were fined CNY92.1 million (USD13.7 million), with 15 receiving fines of over CNY1 million (USD148,700) each, three of which were penalized over CNY2 million.
Editors: Tang Shihua, Kim Taylor
