Two branches of China’s largest banking group, the Industrial and Commercial Bank of China, have been placed under investigation after several cases of illegal fundraising and loan fraud were unearthed in Hubei Province.
The latest results show that one branch in Jingmen, near the provincial capital Wuhan, had been sidestepping official lending quotas in order to raise funds for illicit investments.
China’s banking regulator has been looking into ICBC’s Hubei operations for several months after an explosion of missed debt payments caught the attention of the central government.
It was reported by Caixin earlier this year that a branch in Hubei’s second-largest city, Xiangyang, had raised Rmb 13.2 billion ($1.92 billion) between 2014 and 2016 through the sale of illegal investment products to a range of other banks. The funds were then moved to regional real-estate companies short of cash.
The latest revelations put ICBC among the ranks of Chinese financial institutions whose history of engaging in “shadow banking” is creating concerns of liquidity caps and growing risk to the country’s financial system.