Top Chinese banks flunk government audit

Two Big Four banks cited for improper financial management.

The National Audit Office has released audit results for three state-owned banks: Agricultural Bank of China, China Construction Bank and Export-Import Bank of China. The first two are among the Big Four state-owned banks.

NAO said the three state-owned banks were found to have extended loans worth US$4 billion that broke rules and regulations. Their violations included extending loans to unqualified projects and companies, breaching lending procedures and extending individual loans against the rules.

The banks were also found raising deposit rates against the rules, reporting false deposit volume and inflating capital assets.

Some US$81 million owed in taxes has been paid and US$101 million in losses recovered, NAO said. Problems found in the banks had been basically corrected in March 2012, it added.

NAO began auditing the financial accounting of 10 central SOEs, including the three banks, last year. Among the state-owned enterprises audited were China Mobile, power producer Huaneng Group, China Minmetals Corporation and China National Aviation Holding Company.

The audits found that the financial management of some companies was not properly regulated, with problems including inaccurate accounting and incomplete financial statement compilation.

Other problems found included poor management of investment decisions, inadequate emphasis on internal management and practices that violated related laws and regulations. NAO said the companies have moved to address the problems.

By the end of March, the audited companies had stipulated or improved 785 regulations, penalized 70 people found responsible for the problems and made a supplementary tax payment of US$86.6 million.

NAO audits the financial accounting of SOEs every year in an effort to discover existing problems and potential risks to maintain and increase the value of state assets.