China’s auditors have found more than $1,2-billion in problem loans at three top banks, highlighting the ongoing poor credit practices in the financial system, the government said on Friday.
The questionable loans were found at two of the nation’s largest — Bank of China and the Bank of Communications, as well as at China Merchants Bank, which was recently voted by Euromoney magazine as one of the country’s best banks.
According to a report released on Friday by China’s National Audit Office, questionable loans at Bank of China totalled 5,51-billion yuan ($729-million), Bank of Communications 1,94-billion yuan and China Merchants 1,90-billion yuan. The audit found suspect loans that dated back as far as 2002 but mainly focused on those from 2005.
According to the auditor’s report, the lending largely went to unqualified real estate companies or fraudulent personal mortgages, many being siphoned off into land or stock market investments.
Other irregularities included settlement transactions not conforming to regulations, inadequate oversight of accounts and improper procurement practices.
Twenty-one cases being probed at the Bank of China were suspected of involving criminal or corrupt activities, it said.
At China Merchants Bank and Bank of Communications, eight such cases each were under legal investigations.
In the past the accounting office’s reports have led to arrests and criminal prosecution.
The auditing office released its overall broader 2006 report last month, uncovering 37-billion yuan of mismanaged public funds that implicated a wide range of state-linked agencies and government departments. — Sapa-AFP