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The Bank of China vowed yesterday to strengthen internal controls in an effort to clamp down on fraud following a string of high-profile scandals.
"We should try to prevent similar cases from reoccurring," said spokesperson Wang Zhaowen, as criminal cases have a negative impact on the bank's reputation.
He made the remarks after the announcement that Beijing Huayuanda Real Estate Development Company appeared to have colluded with staff at the bank's Beijing branch to obtain about 645 million yuan (US$77.7 million) in fraudulent mortgage loans for its Senhao Apartments.
In January, the bank also announced that one of its sub-branches in northeastern Heilongjiang Province had been involved in fraud. Gao Shan, an official from that branch, vanished along with 290 million yuan (US$34.9 million).
Wang Zhao, a researcher from the State Council Development Research Center, said the latest case was typical for domestic banks.
"There is a big loophole," he said. "It suggests the banks' internal control systems and corporate governance are far from perfect."
Domestic banks urgently need to improve controls as they face fierce competition from foreign rivals, he added.
According to Wang Zhaowen, the Bank of China will carry out a thorough review of all its business operations to find and close loopholes.
"The examination will focus on the implementation of all of the bank's rules and regulations, including exchange of work posts among bank staff," he said.
The bank has already established a special team of experts from consulting firms and banks to check business procedures, institutional structures and existing internal control mechanisms, he said.
It will also promote the education of its staff, he said.
The bank, which was chosen by central government as a pilot joint-stock firm, won a US$22.5 billion capital injection from the State in December 2003.
(China Daily April 5, 2005)
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