Bloomberg
Huarong Debacle Highlights Problems at Hundreds of Chinese Banks
(Bloomberg) — Lai Xiaomin, former chairman of China Huarong Asset Management Co., was found guilty of accepting $277 million in bribes, as well as bigamy, crimes serious enough to see him summarily executed in January.Such extreme behavior — and consequences — are rare in any country. But in China, more modest but still flagrant mismanagement is common in the $54 trillion financial industry.In 2020 alone, the country’s top banking regulator issued almost 3,200 violations against institutions and 4,554 against individuals ranging from senior executives to rank-and-file staff; it levied fines totaling 2.3 billion yuan ($352.2 million). In the U.S., which has a much longer history of bank regulation, the Federal Reserve took 58 enforcement actions in total.Among the infractions, Chinese investigators found fabricated financial statements, executives’ nannies and chauffeurs installed as controlling shareholders, and favorable rates and sweetheart deals for investors and relatives.The state has also bailed out three poorly-run small lenders and merged dozens more since its first crackdown three years ago. Still, out of 4,400 financial institutions, 12.4% are designated at high risk for failure by the central bank. Now, the government is rewriting the commercial banking law and will have “zero tolerance” for transgressions.“Poor governance is obviously a risk for financial stability,” said…
