Shanghai Regulator Hits Local Banks with a Raft of Penalties


The Shanghai branch of China’s banking regulators has just issued a slew of administrative penalties to the local branches of several key lenders, including China Minsheng Bank, China Merchants Bank, the Industrial and Commercial Bank of China and Shanghai Jinshan Huimin Cunzhen Bank.

The total value of the fines issued to these four banks is estimated to be in excess of 10 million yuan (approx. USD$1.45 million), with ICBC copping the biggest penalties for regulatory infractions in relation to its negotiable instrument operations.

The administrative penalty issued by CBRC’s Shanghai branch to ICBC states that the Shanghai branch of ICBC’s note operations department failed to fully authenticate negotiable instruments during financial transactions with three separate banks, as well as engaged in note handling operations on behalf of other banks beyond the bounds of its authorisation.

ICBC’s negotiable instrument operations have seen rapid growth of late, with the value of its discounted bills skyrocketing 37.9% in 2016 for an increase of 197.941 billion yuan.

This surge has been accompanied by a rise in regulatory infractions. ICBC’s Fuyang branch received a fine of 50,000 yuan in June last year for handling negotiable instruments that weren’t backed by any real transaction, while in July its Yueyang branch received a fine for 200,000 yuan for improper handling of negotiable instruments.

In November the Zhejiang branch of ICBC was hit with a fine of 1.85 million yuan, for undertaking bank’s bill of acceptance operations that lacked an authentic background transaction.

Negotiable instruments have become a focal area for regulators in recent years, with its security index one of the highest amongst banking operations.

One analyst said to Beijing Business Today that intensifying competition for negotiable instrument business has driven some banks to engage in transactions that are non-compliant or even in breach of criminal law.

The internal control, inspection and administrative mechanisms of many banks also remain inadequate, leading to increased risk in relation to negotiable instrument business.