China’s banking authority issued a record volume of fines in 2017, as newly appointed chair Guo Shuqing launched a crackdown on lenders amidst Beijing’s broader financial deleveraging campaign.
The latest official data indicates that the China Banking Regulatory Commission dispensed 3,452 penalties in 2017, as well as confiscated funds from 1,877 financial institutions worth a total of 2.93 billion yuan (approx. USD$465 million), for a 10-fold increase compared to 2016.
Roughly 270 executives in the banking sector received penalties, with some incurring life-time bans from working in the industry.
The crackdown on the banking sector launched by CBRC chair Guo Shuqing last March is expected to continue undiminished in 2018, with the regulator handing out an average of 16 penalties per day in January.
Major penalties this year have included a 462 million yuan fine for the Shanghai Pudong Development Bank, after its Chengdu branch extended USD$12.14 billion in credit to shell companies in order to conceal non-performing loans, as well as 52.5 million yuan in fines for 19 banks in central China, after they were defrauded by hucksters who used low purity gold as collateral for 19 billion yuan in pledged loans.
“The scrutiny will continue,” said Chen Shujin, analyst at Hua Tai Securities in Hong Kong to Bloomberg.
“The regulators are particularly targeting internal controls and interbank activities.”
This heightened regulatory scrutiny has already raised trepidations amongst observers, with Fitch Ratings warning last month that CBRC’s crackdown could hamper the profitability of banks by impeding capital health, forcing to lenders to restore of loans back onto balance sheets, as well as leaden them to lose opportunities.