trending Market Intelligence /marketintelligence/en/news-insights/trending/bjm666ap0n4qcndiiuztnw2 content esgSubNav
In This List

Chinese banking regulator's fines on banks jump 10-fold in 2017

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


Chinese banking regulator's fines on banks jump 10-fold in 2017

The China Banking Regulatory Commission slapped a record amount of fines on financial institutions in the past several months for various violations, including lax lending procedures and manipulation of bad-loan data.

Based on January's record of an average 16 fines imposed every day, the flurry of fines is expected to continue, Bloomberg News reported Feb. 6.

The banking regulator, or CBRC, imposed penalties and confiscation of funds involving 1,877 financial institutions totaling 2.93 billion yuan in 2017, a 10-fold jump from 2016, official data showed. Some 270 banking executives were punished, which included being banned from the banking industry for life, Bloomberg said, citing a CBRC official speaking on CCTV.

In January, Shanghai Pudong Development Bank Co. Ltd. was fined 462 million yuan for what the CBRC called "a well-organized fraud." Further, the CBRC fined Industrial & Commercial Bank of China Ltd. and 18 other banks' branches in central China a total of 52.5 million yuan for extending 19 billion yuan worth of loans pledged with low-quality gold.

Fitch Ratings, in a January report, said the fines are unlikely to have a significant impact on banks' financial profiles, but tighter regulation will force banks to bring more lending back onto their balance sheets, where it consumes capital.

"More stringent loan-classification practices would most likely lead to higher credit cost, which would undermine internal capital generation and add to pressure on capitalization," Fitch said. "These indirect effects, together with higher operational costs associated with more stringent risk management and compliance, are likely to be more significant than the direct financial impact of the fines."

As of Feb. 5, US$1 was equivalent to 6.29 Chinese yuan.