The Shanghai Daily News and the Associated Press reported that Chinese bank regulators have found a total of $118 billion (860 billion Yuan) in irregularities last year. The banking misconduct caused the firing of 177 bank managers, though it was unclear as to whether anyone would face prosecution. Neither the banking commission nor the Xinhua News Agency gave any more specifics as to what the offenses were, or what the extent of the activities were.
The Chinese government has attempted to improve oversight in the banking industry to provide greater transparency in their attempts to sell more shares to foreign investors, particularly those in the west. While the government provided no additional details on the banking misconduct, it was pointed out that the amount of banking misconduct was less in 2007 than in 2006. The government did reiterate that it is trying to increase diligence in an attempt to make the Chinese banks more competitive in the world financial markets.
Last week the Chinese government also ordered Chinese banks to increase its funding of reserves to head off a possible debt crisis due to over-lending. The reserve amount will now reach 15 per cent, up from 14.5 per cent. The government, via China’s central bank – The People’s Bank of China – is concerned that an overheated lending climate, which has helped fuel the Chinese economic boom, will eventually pressure banking reserves, and so it has moved to increase the reserve ratio to keep pace with the accelerated growth of the lending pool.
The Hang Seng Index (HSI) in Hong Kong, has recently reflected twin concerns about the US and Chinese economies. While the US concerns of possible recession and falling stock valuations are well known here, the concerns for the Chinese economy are that growth will slow as well as China’s rising interest rates, with six interest rate increases in the last year. The Hang Seng was at 25.837.88, its lowest close since September 20.
China’s largest bank, Industrial and Commercial Bank of China (OOTC: IDCBF), has traded down to 5.12 dollars, while China Construction Bank (OOTC: CICHF) lost 14 cents to drop to 6.13.
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