Ex-chair of Hengfeng Bank Receives Death Sentence for Illegal Transfer of $107 Million in Shares

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The former chairman of beleaguered regional lender Hengfeng Bank has been sentenced to death by a Shandong province court.

The Middle People’s Court of Yantai municipality in Shandong province announced on 26 December via its official WeChat account that it had found Jiang Xiyun (姜喜运), former chair of Hengfeng Bank, guilty of corruption, bribery, the illegal issuance of financial documents and the wilful destruction of accounting documents.

The court gave Jiang Xiyun a death sentence, which can be commuted to a sentence of life imprisonment following a two-year reprieve period, as well as confiscated all of Jiang’s personal assets.

The sentencing arrives just after Hengfeng announced that it would receive a 100 billion yuan bailout from Beijing, via the sale of shares to parties including state-owned vehicles Central Huijing Investment and Shandong Financial Asset Management.

In June the China Bank­ing and In­sur­ance Reg­u­la­tory Com­mis­sion (CBIRC) an­nounced that it was ac­cel­er­at­ing its re­struc­tur­ing of Hengfeng af­ter the Shandong-based mid-sized bank failed to pro­vide fi­nan­cial state­ments for two con­sec­u­tive years. 

According to the Yantai court during the period from January 2008 to January 2013 Jiang used his position as Hengbank Bank chair to transfer 283.659 million shares in Hengtai Bank to companies controlled by himself and his friends and relatives.

The total value of the shares transferred was equal to over 754 million yuan (approx. USD$107.712 million), given net assets per share as determined on the basis of Hengfeng Bank’s annual reports.

Jiang and another bank executive also received bribes worth in excess of 60 million yuan.

Other Hengfeng Bank executives tried by the Yantai court included

  • Zhao Chunying (赵春英), former vice-president and financial executive with Hengfeng Bank, who received a prison sentence of 12 years and a fine of 1 million yuan for bribery;
  • Zhang Wenkai (张文凯), former vice-president and head of the credit risk monitoring department, who received a prison sentence of two years and ten months for issuing financial documents in breach of regulations;
  • Sun Jinguang (孙金光), who received a prison sentence of two years and nine months and a fine of 20,000 yuan for deliberately destroying accounting documents.

2019 has been a tu­mul­tu­ous year for smaller re­gional lenders in China, with a string of bank runs and up­sets which in sev­eral cases ne­ces­si­tated in­ter­ven­tion from the cen­tral gov­ern­ment. 

Two re­gional banks in China suffered abortive bank runs within a two week pe­riod in early No­vem­ber – Yingkou Bank in the north­east­ern province of Liaon­ing and Yichuan Rural Com­mer­cial Bank in Henan province. 

Ear­lier in the year the Chi­nese gov­ern­ment took over In­ner Mon­go­li­a’s be­lea­guered Baoshang Bank in May, for the first such forcible ac­qui­si­tion in more than two decades, while a trio of lead­ing state-owned fi­nan­cial in­sti­tu­tions sub­se­quently took over the north-east­ern Bank of Jinzhou in July.

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Over 13% of Chi­nese Banks Cat­e­gorised as High Risk, More than One Third of Rural Lenders: PBOC

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