As bank heists go, Bank of Tianjin’s recent loss of Rmb786 million ($121 million) is not quite up there at the top of the league. According to the New York Times, Saddam Hussein got his son Qusay to withdraw $1 billion from the Central Bank of Iraq hours before the Americans began bombing in 2003 (the newspaper said it took bank staff two hours to load up three vehicles with the cash).
But the loss of the cash was a pretty embarrassing admission by Bank of Tianjin, with its chairman telling shareholders of the ‘risk incident’ in a regulatory disclosure just nine days after its Hong Kong listing.
Worse still, it is the third scandal involving Chinese lenders’ bill financing business this year.
In all three cases, corrupt bank staff appear to have been able to take advantage of’ supervisory loopholes to cash in bills of exchange at a third party, normally a bills agency, and then invest the proceeds in the share market. Bills of exchange are chits issued to clients who have deposit accounts or can offer other collateral. They can be used as promissory notes guaranteeing payment to new counterparties and are often traded among banks.
(As Business Insider comments the latest incident may be a buy signal for A-shares: “The fact that this heist happened now at a time when the regulators are encouraging the Chinese stock market to get back on its feet is pretty interesting. The casino is open.”)
In January, Agricultural Bank of China said two employees had absconded with Rmb3.9 billion. According to Caixin Weekly, the theft was only discovered after a security box was found to contain a stack of newspapers rather than bank bills. A few days later China Citic Bank also reported a similar ‘risk incident’ involving Rmb969 million.
Caixin says the problem has worsened as demand for such bills has increased – with the face value of outstanding amounts increasing 56.9% to Rmb4.6 trillion to the end of 2015 versus 2014.
The regulator is now asking banks to tighten up their procedures to avoid further embarrassment. n
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