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China found irregularities at major lenders
Published on: 2009-06-24
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SHANGHAI -- China's National Audit Office uncovered lending irregularities and improper activities in a routine check of three of the country's major banks last year, the lenders said.

Industrial & Commercial Bank of China Ltd., China Construction Bank Corp. and China Citic Bank Corp. said in separate statements that the findings won't have an impact on their results or materially affect past earnings.

None of the three banks disclosed the size of the irregular loans. The country's chief auditor, Liu Jiayi, said in February that his office uncovered some serious illegal activities involving six billion yuan ($878 million) during an audit last year of several financial institutions, including ICBC, China Construction Bank and Bank of China Ltd.

ICBC, China's largest lender by assets, said the audit report found "there were weaknesses in the operation and management of certain branches of the bank." It said it has rectified all the noncompliance issues and taken measures to further standardize and strengthen its operation and management.

China Construction Bank and China Citic Bank said the auditor found lending irregularities and poor oversight over lending at some of their branches.

China Construction Bank also said the audit report had uncovered fraud in the arrangement of some corporate loans.

"Thanks to insufficient supervision and regulation, some enterprises fraudulently obtained loans by colluding with the bank's employees," China Construction Bank said. The bank said it has recovered most of the irregular loans and the outstanding amount will be recovered shortly.

Bank of China said last month the government auditor found illegal activities at some branches and the people involved in the violations had been or were in the process of being prosecuted.

Despite improved corporate governance and solid financial positions after Beijing spent trillions of yuan to restructure the country's banks, most lenders still lack proper risk-control procedures at some of their branches, analysts say.

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