Leading regulator orders banks to strengthen risk control and compliance measures

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Chinese banks have been ordered to step up their risk control and trade compliance measures after two widely reported scandals hit the industry recently, the industry’s top regulator said.

The economic and financial environment facing the banking sector is complex and serious, and some long-standing problems have been widely exposed, the China Banking and Insurance Regulatory Commission said in an opinion on Wednesday.

Some banks are ineffective in implementing national macro policies, some have been repeatedly investigated due to problems in their credit management and some have tried every trick to use regulatory arbitrage, said the commission.

“In particular, recent cases concerning the cases of instruments guaranteed by certificates of deposit have damaged the overall reputation of the banking industry and issues such as low awareness of compliance, insufficient assessment of potential business risks and lack of basic management and control systems. measures have surfaced, ”he said.

Last month, China Bohai Bank, a national joint-stock commercial bank based in Tianjin, in the north of the country, was accused by a corporate client of secretly using its 2.8 billion yuan ($ 438 million) in security deposits.

The Shanghai Pudong Development Bank, another national joint-stock commercial lender, was reportedly involved in similar cases in mid-November.

But creditor companies and banks have made conflicting public statements, causing confusion.

Shanghai Pudong Development Bank announced on its official Weibo account on Wednesday that it was conducting a full investigation and would fully cooperate with a Public Security Bureau investigation.

In response to the disputes and the turmoil they sparked on social media, the CBIRC said on Saturday it “attaches great importance” to the issue, and is conducting on-site investigations with both banks.

“If it turns out that the banks have broken the rules and the laws, they will be severely punished and held accountable,” said a spokesperson for the commission.

There is an urgent need to learn lessons, accelerate the repair of management flaws and loopholes, and fundamentally reverse the situation in which internal control requirements give way to business development, adds the opinion.

The CBIRC has also pledged to severely crack down on the involvement of bank staff in private loans, illegal fundraising, and fund brokerage activities.

Investigations into both cases are continuing.


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