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Monday, 25 February, 2002, 06:46 GMT
Fraud strikes China's only private bank
Bank of China building, Hong Kong
The state sector is struggling to deal with bad loans
China's only private bank is wrapped in a fraud scandal, less than a month after allegations of theft on a massive scale hit the Bank of China.

China Minsheng Banking Corp has acknowledged that it may never retrieve a sizeable slice of 354m yuan ($43m; 30m) in loans it made to one of its own tellers.

The loans, the bank now says, were made between 1997 and 2000 on the basis of forged documents.

The Shanghai-based teller, 29-year-old Huang Jin, is now in custody.

"We recovered some of the funds with police assistance, and will take further legal action soon," Minsheng said in a statement to Shanghai Securities News.

"Our bank will use all means available to minimise losses from this instance."

So far Huang has repaid the bank about 246m yuan. But the rest of the money may never be recovered.

No more Mr Clean

The affair may damage Minsheng, which last year saw net profits rise 60% to 686m yuan and loans expand 90%, over and above the financial loss.

The bank has traded on its position as sole private lender, claiming that the discipline of the private sector means its risk control beats that of state banks hands down.

That claim may be rather more difficult to pursue from now on - even though this scandal pales beside those at public sector banks.

Bank of China was last month fined $20m by regulators in both the US and China after a decade of suspect loans totalling more than 6bn yuan.

Minsheng shares, which can only be owned by domestic investors, were down about 4%.

See also:

28 Jan 02 | Business
Chinese auditors deny bank fraud
25 Jan 02 | Business
China pledges 'cleaner' banks
28 Dec 01 | Business
China issues record stock fraud fine
13 Dec 01 | Business
China firms 'fake' profits
13 Dec 01 | Business
China: an economic super power?
12 Dec 01 | Business
China grants insurance licences
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