The government has declared new controls to curtail irregularities in the banking sector which include an instruction that branch chiefs should resign if major crimes occur on their watch.

 

Banks have also been asked to set up accountability systems which would result in bank executives and auditors taking responsibility for problems.

 

And in the future managers of branches involved in frequent irregularities and criminal cases will not be permitted to take similar jobs at other branches. Those breaking the law will be transferred to judicial departments swiftly.

 

These were some of the 11 measures issued by the China Banking Regulatory Commission (CBRC) on Friday to fight corruption and fraud in banks, cooperative credit units, those responsible for trusts and asset management companies.

 

The move followed a release by the National Audit Office of China a week ago which exposed 51 criminal cases in the Agricultural Bank of China involving 8.68 billion yuan (US$1.09 billion) and 157 bank officials in an audit of the bank's 2004 liability accounts.

 

The bank was also discovered to have granted irregular loans totaling 27.6 billion yuan (US$3.45 billion) in 2004.

 

Over the past few years a number of high-ranking officials in other big State banks, including the newly-listed Bank of China and China Construction Bank, have been arrested for corruption and fraud.

 

The number of such cases remains high within the industry, a CBRC spokesman admitted. Although the watchdog made some progress in 2005 it required to take tougher action to consolidate results and prevent similar cases in the future, he said.

 

CBRC will also increase cooperation with other departments including the police and auditing office to improve efficiency. And more attention will be paid to the big commercial banks.

 

China's major banks are preparing for increased competition by listing on overseas or domestic markets while an increasing number of smaller joint-stock banks are introducing foreign investors and going public.

 

"The banking sector is a crucial part of the national economy and it also reflects the major problems of the economy," said He Ziyun, a banking professor with the University of International Business and Economics.

 

Problems in banks could be stopped by efforts from other sectors as well as more surveillance from the public, auditors and intermediaries but combining discipline and stability during reform remained a challenge, he warned.

 

(China Daily July 4, 2006)