Loan scheme at Shanghai Pudong branch deepens credit worries

A former employee of Shanghai Pudong Development Bank is alleged to have acted as a loan shark and run illegal businesses to the tune of 6.4 billion yuan (HK$7.9 billion).

It is the latest scandal to reflect the severity of the mainland's shadow banking problem and banks' lax management of their branches. Ma Yijiang, formerly deputy head of a branch in Zhengzhou, Henan province, allegedly used the money from cash-rich depositors for loan sharking schemes.

The bank said in a statement it was assisting the authorities in their investigations.

Last month, the failure of a wealth management product (WMP) issued by Huaxia Bank's Jiading branch in Shanghai, which resulted in depositors losing several hundred million yuan, set off alarms in the country's banking sector, and analysts warned similar scandals would surface in the coming months.

A Zhengzhou court heard Ma's case earlier this week. The Shanghai bank said he resigned in October 2011.

The 21st Century Business Herald, an influential business newspaper, said Ma enticed depositors to hand their money to him by offering lofty interest rates between 2009 and 2011.

He lent the money, reported to to amount to 6.4 billion yuan, to other businesses, such as property developers, charging super-high interest, the newspaper said.