Lending irregularities in China banks

June 23, 2009

, SHANGHAI, Jun 23 –  Three major Chinese banks have said the nation\’s top auditor had uncovered lending irregularities in their business, adding the findings would not impact their financial results.

The National Audit Office found violations last year by Industrial and Commercial Bank of China (ICBC), China Construction Bank and China CITIC Bank, the lenders said in separate statements.

ICBC, the country\’s largest lender, said the auditors found "non-compliance issues in the business operation and weaknesses in the operation and management of certain branches of the bank."

China Construction Bank and China CITIC Bank said some branches had been found to have extended loans that violated government rules.

"In certain suspected cases, insufficient regulation of individual sub-branches also allowed for certain individual enterprises to fraudulently obtain bank loans by colluding with the bank\’s employees," China Construction Bank said.

The vast majority of the non-complying loans have been recovered and the outstanding amount will be collected shortly, it added.

None of the three lenders disclosed the size of the irregular loans, only claiming they had dealt with the matters and taken steps to improve risk management and internal controls.

The admissions came amid concerns over Chinese banks\’ lending spree to heed Beijing\’s aggressive efforts to stimulate the economy by boosting fiscal spending in government projects such as infrastructure.

In February, the country\’s top auditor said six billion yuan (878 million dollars) was misused in 20 major cases uncovered during investigation of financial institutions in 2008.

About half of the cases involved ICBC, Bank of China and China Construction Bank, said Liu Jiayi, auditor-general of the National Audit Office.

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