More fraud and poor performance at the Bank of China (BOC) has been unearthed according to official investigators who have recently completed an audit of the bank's headquarters in Beijing, seven provincial branches and more than 150 lower-level branches. This follows days after it was revealed that fraud and loose management practices at a New York branch had caused the bank significant losses, including a US$20 million fine. (Fraud Alert 22 January 2002).

China's National Audit Office (NAO) said its investigations into the state-owned commercial bank's Chinese operations revealed a series of lending violations and illegal operations involving 22 cases, 35 people at a total value of approximately US$325.2 million.

Improvements

In its examination of assets and liabilities in 2000 the NAO also found poor quality assets and high expenses although the investigators conceded that BOC had made progress in profitability and capital adequacy over recent years.

In respect of the apparent frauds at BOC, investigations have again focused on the bank's former president and before that the head of the its US operations, Wang Xuebing. He was sacked this month from his current post at the China Construction Bank in Beijing.

L/C violations

Major problems unearthed by the investigators include violations of rules in lending, issuing letters of credit and bills of exchange and off-the-account operations, according to NAO chief, Li Jinhua. The governor of China's central bank has said investigations into illegal lending and BOC's former president will continue.

Separately, the current BOC president Liu Mingkang has said the bank plans to close 88 branches and make 5,000 staff redundant. The bank is reviewing some of its operations with a view to stock market listings in Hong Kong and New York.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.