Several major Chinese financial institutions, including two of the country’s largest commercial banks, were found to have broken the rules on lending to key industries targeted in Beijing’s deleveraging drive during a government investigation.
The National Audit Office (NAO) found that Industrial and Commercial Bank of China (ICBC) and Agricultural Bank of China (ABC), the country’s largest and third-largest by assets respectively, had committed several significant financial infractions, including illegal shadow banking, misclassification of risks, and excessive lending to certain bodies including government financing vehicles and property sector firms.
As Caixin reports, ICBC sold wealth management products and interbank deposits to ineligible companies during the years 2012 to 2016, raising some RMB 67 billion ($10 billion). ABC, from 2015 to 2016, raised RMB 22.8 billion from the same practice.
Beijing’s recent debt financing crackdown has targeted such risky behaviour and shadow banking by large organisations which have brought leveraging levels in the economy to a concerning level.
According to the NAO’s report, 1,551 staff members from the accused companies will receive punishments in some capacity. However, no penalty for the companies themselves was outlined in the report.