China's banking watchdog plans to investigate loans made by the country's big state-run banks in the latest attempt to clean up the scandal-ridden financial sector.
Lenders must beef up internal controls and stop making risky decisions for the sake of greater market shares and fatter profits, officials of the China Banking Regulatory Commission said in comments seen yesterday on the regulator's Web site.
The commission said it plans to step up checks on loans for investment projects, real estate and consumer purchases and will also investigate the banks' nonperforming loans.
"Some banks have relaxed controls over their branches, enabling them to blindly pursue market share and business profits and neglect risk management," said Che Yingxin, assistant to the commission's chairman.
China's state-owned banks have repeatedly been caught up in scandals resulting in huge losses.
The Bank of China recently was rebuked by the banking watchdog over suspected fraud involving several hundred million yuan at a branch in Harbin.
Government audits last year uncovered a massive lending scandal at the country's biggest commercial bank, the Industrial and Commercial Bank of China.
Last week, the chairman of the China Construction Bank, the country's third biggest lender, stepped down amid unconfirmed reports he is under investigation for allegedly taking bribes.
The bank said the chairman, Zhang Enzhao (
The financial magazine Caijing reported in its March 21 edition that Zhang has been accused of taking bribes in a lawsuit filed in California.
However, the repeated disclosures of mismanagement and other abuses by top banking officials appear not to have disrupted plans for the banks to restructure and sell shares overseas.
The Construction Bank, for example, is expected to raise US$5 billion to US$10 billion by listing shares in Hong Kong later this year.
Zhou Xiaochuan (
But Zhou said that he believed it was better for the bank to disclose any problems before it attempts an initial public offering.
"It's better for this to have happened before the prospectus is completed than afterward," the report quoted Zhou as saying in an exclusive interview.
"The impact of this will depend on what on earth is found out about the affair later," he said.
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