China Citic Bank Corp. Ltd. (00988.HK), a unit of the nation’s largest investment conglomerate, uncovered a fraud case at its bill-financing business involving about 1 billion yuan (US$152 million) late last year, Bloomberg News reported, citing people familiar with the matter.
An employee at the bank’s branch in Lanzhou city allegedly conspired with other people to fake documents that were used as collateral to get bankers’ acceptance from May to July 2015, the sources said.
The acceptance was later sold several times at discounted prices, bringing total exposure to 900 million yuan to 1 billion yuan, the report said.
The proceeds were invested in stocks, and the fraud was uncovered after Chinese equities slumped, a source said.
An official at Citic Bank declined to comment when contacted by phone.
The case underscored poor internal controls and risks at Chinese banks’ bill-financing businesses, which are short-term corporate lending operations that have more than doubled in value to 4.6 trillion yuan in the past two years and helped fuel the nation’s roller-coaster stock market.
Agricultural Bank of China Ltd. (01288.HK, 601288.CN), the nation’s third-largest lender, revealed last week a 3.9 billion yuan case of bill fraud at its Beijing branch.
In a sign of tighter scrutiny, the China Banking Regulatory Commission issued a notice earlier this month asking banks to review bill-financing businesses for violations and risks, Bloomberg said, citing sources.
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