China's antigraft agency unveils corruption cases involving banking regulators

·4-min read
Baoshang Bank (Photo Credit - Reuters)
Baoshang Bank (Photo Credit - Reuters)

Beijing [China], May 30 (ANI): China's top antigraft agency, Central Commission for Discipline Inspection (CCDI) on Tuesday disclosed details of corruption cases involving five former banking regulators in the Inner Mongolia autonomous region.

As per the CCDI report, the regulators took more than 700 million Yuan (USD 109 million) in bribes, mostly connected with scandal-hit Baoshang Bank, a failed local lender taken over by the state in 2019, reported Nikkei Asia.

The officials, including Xue Jining, former head of the Inner Mongolia branch of the now-defunct China Banking Regulatory Commission (CBRC), abused their power to seek benefit for those who paid them bribes related to establishing institutions, approving new businesses and loans, project construction and personnel appointments, said the CCDI report.

Xue, who is currently standing trial for corruption, accepted more than 400 million yuan, the report said. Xue was Communist Party secretary and head of CBRC's Inner Mongolia branch from 2007 to 2014 before retiring in 2015. He was expelled from the party in January 2021 after he was put under investigation in June 2020.

One unnamed official from a special CCDI task force set up to investigate the issue said: "The problem of regulatory corruption exposed by the cases [linked to Baoshang Bank] is shocking."

The report is part of an education campaign the agency is running for officials at the China Banking and Insurance Regulatory Commission (CBIRC), which superseded CBRC in 2018, reported Nikkei Asia.

"Under the bad influence of 'a key minority,' Inner Mongolia's banking regulatory system fell across the board," the report said.

"Big or small, these officials ate everything," taking bribes not only from Baoshang Bank but also from other banking and financial institutions, business owners, relatives, friends and subordinates.

They also roped in their families, with spouses, siblings and parents all getting involved, the report said.

The regulators failed to fulfill their responsibilities to supervise Baoshang Bank, a CCDI official said. The banking regulator's Inner Mongolia branch and Baotou branch did not fully conduct due diligence when approving the lender's new businesses, which covered up problems that should have come to light if the procedures had been correctly followed, the official said.

Corruption was endemic among the regulators and was an important factor in the collapse of Baoshang Bank. About 80 per cent of the 700 million yuan of bribes uncovered by the CCDI task force was related to the lender, the report said.

The cases came to light in the wake of investigations into the collapse of Baoshang Bank, which was seized from private conglomerate Tomorrow Holding in May 2019.

The bank's high leverage, poor lending practices and corrupt activities had built up risks that regulators feared could threaten the stability of the banking system.

Subsequent investigations found a 220 billion Yuan hole in the bank's books due largely to massive misappropriation by Tomorrow Holding, whose billionaire founder Xiao Jianhua was placed under investigation by anti-corruption authorities in early 2017.

Baoshang bribed regulators to help expand and avoid regulatory scrutiny, the CCDI report revealed.

It gave 100,000 yuan to Liu Jinming in late 2009 as a welcome gift when he was appointed as the Communist Party Secretary and Director of the CBRC branch in Baotou, where the lender is based, reported Nikkei Asia.

From 2009 to 2016, officials from the CBRC's Inner Mongolia and Baotou branches conducted more than 50 on-site inspections of Baoshang Bank, but deliberately avoided inspecting parts of the business that posed potential risks and never imposed administrative penalties for problems they uncovered.

The banking regulator has its own internal rating system for the country's lenders and the CCDI task force found that local regulators managed to lift Baoshang Bank's rating to a level that was "seriously inconsistent" with its actual risks. They also ignored reports from the public alleging that Baoshang Bank was controlled by an illegal financial conglomerate and had transferred massive funds to it.

Baoshang Bank was the first Chinese lender to be taken over by the state in two decades. As part of a restructuring to clean up the bank, its good assets were transferred to Mengshang Bank -- a new entity set up to deal with the fallout from the lender's collapse -- and Hong Kong-listed Huishang Bank.

Other assets were kept by Baoshang Bank. In November 2020, CBIRC gave its formal approval for the lender to start bankruptcy proceedings which were finalized in February, reported Nikkei Asia. (ANI)