China's banking regulator has fined 19 banks a total of 52.5 million yuan over their involvement in a 19-billion-yuan loan fraud pledged with low-quality gold.
Banks in Shaanxi and Henan provinces extended loans based on collateral of low-quality gold, highlighting weaknesses in internal controls at these lenders, according to a Feb. 2 China Banking Regulatory Commission statement.
The CBRC noted that the lenders did not conduct sufficient due diligence and review of collateral before offering loans in these instances, in violation of prudent risk management principles. The regulator said these banks were "blindly" pursuing expansion of scale and growth and failed to understand their customers and the business risks involved.
The CBRC's bureau in northwestern Shaanxi province imposed 50 million yuan worth of fines on 18 banks, including a 10 million yuan fine on Postal Savings Bank of China Co. Ltd. Meanwhile, the regulator's Henan bureau in central China fined Industrial & Commercial Bank of China Ltd. 2.5 million yuan.
The regulator recently fined 12 Chinese banks a combined 295.44 million yuan for illegally trading bank bills.
China's financial regulators have vowed to strengthen rules in 2018 to tackle risks in the sector and to ease the pace at which the economy and indebtedness have grown.
As of Feb. 2, US$1 was equivalent to 6.30 Chinese yuan.
