China banks must do more to curb illegal financial activities: PBoC's Dai

SHANGHAI (AFX-ASIA) - China's banks must to more to strengthen their internal controls and prevent illegal financial activities, People's Bank of China governor Dai Xianglong said, according to the Financial News.

	    Dai said the internal controls in the banking system are currently inadequate and management is not strict enough.

	    Criminal cases occur very frequently, particularly cases of fraud, robbery and inappropriate use of bank funds, he said, adding that these seriously harm banks' reputations, increase financial risk and harm financial security and social stability.

	    The reason why there have recently been so many cases of this kind is that some financial institutions are only making efforts to digest deposits and are neglecting their principles when opening up accounts, making settlements and lending funds.

	    Some are also too ready to believe capital brokers, which causes a lot of illegal activities.

	    He said banks have drawn up their own operating rules but these remain only on paper and are not implemented.

	    Some bank employees use their positions to engage in corruption and steal or make use of bank funds, while some cooperate with non-bank employees to fraudulently acquire bank funds.

	    Dai added that banks' technology for preventing fraud has become backward while financial criminals have become more skilful in recent years.

	    Equipment for detecting counterfeits is not exactly able to tell whether bills or chops are genuine, he said.

	    He urged banks to strictly adhere to the regulations and the system.

	    He noted that the current focus of banks' work is to investigate cases where institutions have offered illegally high rates of interest to attract deposits.

	    The PBoC will issue economic and administrative punishments to institutions and their senior officials if the institutions continue to offer illegally high rates of interest.

	    It will even cancel the senior officials' qualifications and bar them from working in the financial industry for life, he said.

	    With regard to consumer bank loans, financial institutions should stop illegal competition and should stop issuing mortgages which require zero down-payment and consumer loans which are not aimed at a specific spending plan.

	    Banks should crack down on fraud cases related to bills, and particularly the acceptance of bills, and should also crack down on the inappropriate use of deposits and the use of bank funds to speculate on the stock market, he said.

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