Regulators Issue 2467 Fines to Chinese Banks Since Start of 2017


A new report from the Beijing-based BBT Commercial Research Institute (北商研究院) points to a sharp increase in the value and volume of fines issued by China’s banking regulators to lenders of all stripes in 2017.

The “2017 Beijing Finance Sector Development Report” (2017年北京金融业发展报告) notes that as of 23 November China’s banking regulators had issued a total of 2467 fines since the start of the year, to a broad range of lenders including the big state-owned banks, share-controlled banks and municipal commercial banks.

Regulators have issued fines at an average rate of 240 per month, with the number rising to a peak of 350 in June.

Fines worth a total of 190 million yuan were issued in the first quarter of 2017 alone, equal to around 70% of all fines dispensed in 2016.

By end of the first half of 2017 this amount increased to nearly 340 million yuan, well ahead of the 270 million yuan in fines issued in 2016.

“Because there is a often a lag in the disclosure of penalties, some regulatory punishments have not yet been announced,” said Han Zhe (韩哲), vice-head of BBT Commercial Research Institute.

For this reason BBT expects the total number of banking regulator fines to exceed 2,500 by the end of November, with this amount rising to around 2,800 penalties for the full year.

Chinese regulators kicked off a crackdown on the financial sector starting in March, with the China Banking Regulatory Commission issuing seven directives within the space of roughly a month.

CBRC just recently indicated that it would step up its scrutiny of the banking sector in the near future, with a  “planned, step-by-step, in-depth” crackdown on malfeasance.

In terms of the types of regulatory breaches that attracted fines, most involved loans, negotiable instruments or information disclosures; conduct in breach of prudential operating standards or misappropriation of funds.

Scandals involving negotiable instruments saw a sharp increase last year, with state-owned banks, joint-stock banks and municipal commercial banks all implicated.

Another key area of malfeasance involves the channelling of funds into the property market by covert means, with banks thwarting home loan restrictions by providing consumer finance to prospective real estate investors.

Local regulators have introduced new policies to crackdown on the practice since the start of the fourth quarter, leading to a sharp increase in the number of associated penalties issued.

Other triggers for penalties include lack of prudential loan assessments and the issuance of loans to personal associates.

Guo Tianyong (郭田勇), chair of the China Banking Sector Research Centre at the Central University of Finance and Economics said that while banks should make risk control their chief priority, they often expand loan issuance and relax lending assessments in order to meet certain performance benchmarks.