State auditor uncovers 57b yuan of illicit activities at mainland banks

The mainland's top auditor has uncovered illegal activities and irregularities involving more than 57 billion yuan (HK$65.17 billion) in nine financial institutions last year, including 9.1 billion yuan of problem loans granted by policy lender China Development Bank (CDB).

Development Bank, which owns about 3 per cent of British bank Barclays, was also responsible for 24.57 billion yuan of misused loans, of which 5.84 billion yuan was spent on the stock and property markets and other restricted industries, the National Audit Office said yesterday.

The auditor's report further highlights weak internal control and supervision at financial firms after last year's discovery of irregularities involving 15.6 billion yuan at three listed banks - Bank of China, Bank of Communications and China Merchants Bank - in 2005 operations.

The audit office said it had transferred to prosecutors the cases of 144 people in 43 suspected crimes involving 14.1 billion yuan at the financial institutions.

In addition, irregularities involving 43.6 billion yuan had been rectified after the audit and 1,450 people punished.

Energy companies including China National Petroleum Corp, China Huadian Group and Harbin Power Equipment Corp were also found to have misstated profits totalling 7.86 billion yuan - an understatement of 7.02 billion yuan and 837 million yuan of overstatement.

Poor management of overseas projects also led to the loss of 424 million yuan while embezzlement caused 572 million yuan of losses.