The Bank of China has broken its week-long silence over its Hong Kong branch's exposure to Shanghai property tycoon Chau Ching-ngai, the subject of a mainland investigation into questionable loans and tax fraud.
In a statement issued late last night, China's biggest foreign-exchange bank said BOC Hong Kong (BOCHK) is demanding repayment of $741 million still outstanding from a $1.77 billion loan extended in June last year to New Nongkai Global Investment, Mr Chau's Hong Kong flagship and the holding company of locally listed Shanghai Land Holdings. BOCHK had granted New Nongkai a credit line of $2.1 billion.
According to the statement, BOC Hong Kong 'has applied to and has been granted an order by the High Court of Hong Kong for the receivership of New Nongkai in order to receive and protect the business and assets of New Nongkai and its subsidiaries ... Based on information so far, the New Nongkai loan shall not have material adverse impact on the financial position of [BOCHK].'
Last week, Bank of China chairman and president Xiao Gang declined to disclose whether BOCHK had lent money to Mr Chau.
Bank of China also acknowledged - but stopped short of confirming - media reports that the sudden departure of former BOCHK chief executive Liu Jinbao was connected to the New Nongkai loan or the Chau investigation.
'The head office has also received some complaints. The issue is being investigated,' it said.