The Bank of China (
Beijing Huayunda Real Estate Development Co (
The latest corruption revelation comes as China's biggest four state banks are preparing to go public and need to convince investors that bad loans and poor management are features of the past. Bank of China, China Construction Bank (中國建設銀行) and Agricultural Bank (
"They have to clean up for sure to convince investors that they are now different, with shareholders' interests in their minds," said Arthur Lau, a banking analyst with Barclays Bank Plc in Singapore. "I hope there will be less severe irregularities going forward."
China ordered banks on March 28 to identify which managers are responsible for what departments and to make more timely announcements of financial irregularities in an attempt to tighten surveillance. The scandals won't delay the government's plan to sell shares in the banks, Central Bank Governor Zhou Xiaochuan (
Investigations by Beijing police have continued since the Bank of China first reported the real estate fraud case in September 2002, Wang said, confirming the first report of the case in Xinhua yesterday. A general manager at Huayunda Real Estate and lawyers involved with the falsified home purchase contracts are being probed, he said.
China's banks are trying to strengthen management and clean up bad loans of more than US$500 billion as they prepare to sell shares overseas and confront increased competition when restrictions on foreign banks operating in the country are lifted in December next year. Bank of China has said it's increasing the frequency of audits amid calls by the country's banking regulator to improve their oversight of loans and internal operations.
Investors can't be sure that there will be no more fraud, Lau said by telephone yesterday.
"The best thing the bank can do is to try and bring the thing forward and deal with it, instead of hiding it behind the scene," he said. "I don't think that's going to derail listing plans."
The Bank of China, which reorganized into a shareholding company last year, is seeking strategic foreign investors before listing overseas, as early as this year.
The lender said on Jan. 31 that Gao Shan (
In a separate case, Zhai Changping (
That followed a March 24 announcement by the banking regulator of 115 million yuan of fraud at two offices of the Agricultural Bank of China, and the arrest of a Construction Bank of China branch manager for allegedly embezzling US$8 million.
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