Loose controls and poor governance as well as big size hinder banks from stemming fraud. Frauds in the billions are emerging.

Beijing (AsiaNews/SCMP) – Despite attempts to institute better internal controls in China's banking system, more and more fraud cases involving banking officials are coming to light.

"I can see gradual improvements [in banks' internal controls]," People's Bank of China governor Zhou Xiaochuan said on the sidelines of the National People's Congress. "However, we feel the pace of improvements could be further accelerated."

In fact, despite renewed efforts by regulators to enforce greater controls, insider bank fraud continues.

The latest case involves businessman Zhu Dequan who obtained 96 acceptance bills for a total value of 914.6 billion yuan (US3.8 million) from the Bank of China (BOC), China's second largest financial institution, through a branch in Heilonjiang province.

It was the second large scandal to hit the BOC after Gao Shan, a bank official in the same province, absconded with about a billion yuan of clients' deposits early last year.

For People's Bank of China governor Zhou, the series of scandals can be attributed to the large size of Chinese banks, their multi-layered organisational structure, and traditionally poor corporate governance and internal controls.

Last year, the BOC began implementing a rotation system for heads of its branches and sub-branches to avoid "insider control" at the grassroots, said Tang Shuangning, who is a vice-chairman of the China Banking Regulatory Commission. The latest scam to hit BOC came to light through the rotation of frontline bank employees. (PB)

• china
• banking
• financial
• system
• fraud
• embezzlement