240 corruption cases discovered in Chinese banks threaten banking system

China's state-run banks discovered 240 corruption cases involving a total of 1.6 billion yuan (US$198 million) in funds in the first half of this year, amid stepped-up efforts to police the industry, regulators said. The report by the China Banking Regulatory Commission, carried by state media on Monday, did not name the banks or provide other details, though it said the amount involved was half of the total for all banking scandals in China, suggesting an escalation in the size and number of cases.

China's banks are restructuring and clearing their portfolios of huge amounts of bad debt as they seek financing overseas. Meanwhile, the authorities have been cracking down on economic crimes, expanding audits and taking other measures to rein in errant bank managers named in hundreds of cases of fraud and other abuses.

"It is logical that more and more problems will be exposed during the reform of the banking industry," the official Xinhua News Agency quoted Shen Xiaoming, deputy director of the regulator's Supervision Department, as saying.

Cases discovered between January and June included 64 that involved more than 1 million yuan (US$123,500) in funds each, Shen said. Losses resulting from corruption would be borne by the banks, he added.

According to Shen, bank governors will in the future no longer be allowed to approve loans independently to help prevent abuses by powerful industry insiders, most of whom are appointed by the ruling Communist Party, the AP reports.

The banks already have appointed loan approval committees to prevent bank governors from directly controlling loans, a key factor in numerous scandals, some of which have involved top-ranking officials at the biggest banks.

Meanwhile, the government is amending the audit law to improve oversight of top officials, Xinhua said in a separate report.

The amendment calls for appointments and dismissals of chief auditors to be handled by higher levels of the audit agency, rather than local officials, to give auditors greater independence.

In another anti-graft move, the country's national legislature is expected to ratify the United Nations Convention Against Corruption, which Beijing signed two years ago.

The standing committee of the National People's Congress, which usually approves legislation drawn up by the Communist Party, is discussing the treaty at a session that began Saturday, the state-run newspaper China Daily reported.

The treaty is expected to improve cross-border cooperation, making it easier for Beijing to extradite corrupt officials who flee abroad and to recover stolen assets, the report cited Premier Wen Jiabao as saying.

Thousands of Chinese officials have been sentenced to prison and some executed in a marathon crackdown on embezzlement, extortion and other offenses that the government says have cost the country billions of dollars.

But Beijing has had only limited success in securing the return of corrupt officials who flee abroad, due in part to foreign unease at sending home suspects who might be put to death.

T.E.

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