Bank of China

Another banking chief in custody

PUBLISHED : Tuesday, 12 June, 2012, 12:00am
UPDATED : Tuesday, 12 June, 2012, 12:00am

In yet another embarrassing scandal involving the mainland's banking system, Tao Liming, president of the Postal Savings Bank of China (PSBC), was taken into custody on suspicion of having committed economic crimes.

The investigation, coming close on the heels of the detention of a senior official at Agricultural Bank of China (ABC), underlined the importance of cleaning up the mainland's banks, some of which have been plagued by reckless loans and misappropriation of assets.

Beijing-based PSBC, the nation's seventh-largest lender by assets, said in a statement yesterday that Tao, along with Chen Hongping, chief of an asset operation division, were assisting investigations into suspected economic crimes.

Two weeks ago the Communist Party's anti-graft watchdog detained Yang Kun, an executive vice-president of ABC - one of the country's Big Four lenders - as part of an investigation into illegal gambling operations and corruption.

Tao was placed under shuanggui - a disciplinary system for party members outside the legal system - according to a person close to the PSBC, adding that 'no signs are showing that his problem is related to Yang's case'.

Shuanggui, equivalent to house arrest, is normally initiated against a senior government or state-owned company official after the anti-graft body collects sufficient evidence of any wrongdoing.

He Juxin, an official with China Minsheng Banking Corp, has also been detained by Beijing police in connection with Yang's case.

The investigations reflect Beijing's intensified crackdown on irregularities in the country's banking sector, which one person familiar with the inquiries said was spurred by the once-in-a-decade reshuffle of top leaders set for the autumn.

'It is no surprise that senior bankers were found to have committed economic crimes,' said Guo Tianyong, a professor at the Central University of Finance and Economics. 'The root cause lies in the massive power granted to them without sufficient supervision on them.'

Sources said Tao and Chen were found to have issued illegal loans to clients to book illicit gains and to have misused assets.

Tao was appointed president of PSBC in 2007 after Beijing separated the banking unit of the State Postal Bureau from the postal authorities.

A third person, Zhang Zhichun, who is chief of an investment arm of China Postal Group, the parent of PSBC, was being investigated for wrongdoing too, the person said.

PSBC has 2.8 trillion yuan (HK$3.4 trillion) in deposits, trailing only Industrial and Commercial Bank of China, China Construction Bank and ABC on the mainland.

The bank's main business is extending loans to small businesses in rural areas, but it lacks a complete risk-control mechanism to ensure the safety of its assets, according to the people familiar with the investigations.

Before taking office at PSBC, Tao was a department chief with the Postal Bureau, a government cadre rather than a corporate executive.