Corruption breakers in China shocked by corrupt Baoshang bank regulators
China’s leading anti-graft agency has disclosed details of corruption cases involving five former banking regulators in the Inner Mongolia Autonomous Region, who took more than 700 million yuan ($ 109 million) in bribes, mainly linked to Baoshang Bank, a local lender that went bankrupt by the state in 2019.
Officials, including Xue Jining, former head of the Inner Mongolia branch of the now defunct China Banking Regulatory Commission (CBRC), abused their power to demand benefits from those who paid them bribes related to institution building, approval of new businesses and loans, project construction and staff appointments, the Central Commission for Discipline Control (CCDI) said in a report released Tuesday.
In the report, an anonymous official of a special CCDI task force set up to investigate the matter said: “The problem of regulatory corruption exposed by business [linked to Baoshang Bank] is shocking. “
The report is part of an education campaign the agency is conducting for officials of the China Banking and Insurance Regulatory Commission (CBIRC), which replaced the CBRC in 2018.
“Under the bad influence of a ‘key minority’, Inner Mongolia’s banking regulatory system has collapsed at all levels,” the report said. “Big or small, these officials have eaten it all,” accepting bribes not only from Baoshang Bank but also from other banking and financial institutions, business owners, relatives, friends and subordinates. They also roped up their families, with spouses, siblings and parents all involved, according to the report.
Corruption was rampant among regulators and was a major factor in the collapse of Baoshang Bank. About 80% of the 700 million yuan in bribes uncovered by the CCDI task force were related to the lender, according to the report. Xue, who is currently on trial for corruption, accepted more than 400 million yuan, according to the report.
“The officials and the institutions they oversaw were a family of cats and mice,” the CCDI report said. “The regulators served as foot soldiers of illegal conglomerates and they were deeply bound by common interests.”
The cases came to light following investigations into the collapse of Baoshang Bank, which was seized from the private conglomerate Tomorrow Holding in May 2019. The bank’s high indebtedness, bad lending practices and banking activities corruption had accumulated risks that regulators believed could threaten the stability of the banking system. Subsequent investigations revealed a 220 billion yuan hole in the bank’s books largely due to massive embezzlement by Tomorrow Holding, whose billionaire founder Xiao Jianhua has been investigated by authorities. anti-corruption in early 2017.
Baoshang bribed regulators to help expand and avoid regulatory scrutiny, the CCDI report revealed.
She gave Liu Jinming 100,000 yuan at the end of 2009 as a welcome gift when he was appointed secretary of the Communist Party and director of the CBRC branch in Baotou, where the lender is based. After Liu took office, Li Zhenxi, then chairman of Baoshang, told Liu, “Chief, we are following you and you are supporting us to move forward. When we get older we can have fun together. “
Liu confessed that he planned to rent an apartment when he moved to Baotou, but the bank bought him one. When Liu said that his family lived in Beijing and that he planned to live in the capital after his retirement, Baoshang offered to buy him an apartment in the city and asked Liu to choose an expensive one.
“Baoshang Bank took the initiative to help me with everything, which made me feel like we were a family,” Liu said, quoted by the report. “I had completely forgotten that the relationship between us had to be that of a regulator and an institution under supervision.”
Xue said that when he took over as head of the Inner Mongolia branch of the CBRC, then Baoshang president Li went to great lengths to forge a close relationship with him and “humbly” did him. “consulted on the economy. He also sent gifts to Xue’s wife. And when Xue returned home to Beijing for the New Year holidays, he always brought gifts from Li.
Regulators have failed to fulfill their responsibilities of overseeing Baoshang Bank, a CCDI official said. The Inner Mongolia branch of the banking regulator and the Baotou branch did not fully perform due diligence in approving the lender’s new business, which masked issues that should have arisen if the procedures had been properly. monitored, the official said.
From 2009 to 2016, CBRC branch managers in Inner Mongolia and Baotou carried out more than 50 on-site inspections of Baoshang Bank, but deliberately avoided inspecting parts of the business that presented potential risks and never imposed administrative penalties for the problems they discovered. Xue and Jia Qizhen, a former head of the Inner Mongolia branch, even asked officials to delete records of major violations found during on-site inspections.
The banking regulator has its own internal rating system for the country’s lenders and the CCDI task force found that local regulators had succeeded in raising Baoshang Bank’s rating to a level “seriously incompatible” with its real risks. . They also ignored public information alleging that Baoshang Bank was controlled by an illegal financial conglomerate and transferred massive funds to it.
Xue was secretary of the Communist Party and head of the Inner Mongolia branch of the CBRC from 2007 to 2014 before retiring in 2015. He was expelled from the party in January 2021 after being investigated. in June 2020. Liu and Jia were interrogated by corruption breakers in 2019. and were subsequently expelled from the party and removed from their public office.
Baoshang Bank was the first Chinese lender to be taken over by the state in two decades. As part of a restructuring to clean up the bank, its good assets were transferred to Mengshang Bank – a new entity created to deal with the fallout from the lender’s collapse – and Hong Kong-listed Huishang Bank. The other assets were kept by Baoshang Bank. In November 2020, the CBIRC gave its formal consent to the lender to initiate bankruptcy proceedings which were finalized in February.
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