Bank officials flee after US$120m go missing
(China Daily/Agencies)
Updated: 2005-01-24 23:52

The Bank of China, the country's largest foreign exchange bank, confirmed yesterday that one of its sub-branches in Northeast China's Heilongjiang Province was involved in financial fraud.

The scandal emerged on January 15 when Northeast Expressway, a Shanghai-listed A share company, announced that 290 million yuan (US$34.9 million) of shareholders' funds deposited with the branch was missing.

Gao Shan, director of a division of the branch, reportedly vanished following the disappearance of the money.

Deposits by other companies, amounting to as much as 700 million yuan (US$84.3 million), also vanished.

Another official of the branch was also missing and the two are believed to have fled to the United States or Canada, according to the South China Morning Post.

Newspapers in Hunan and Shanxi reported that Northeast Expressway chairman Zhang Xiaoguang had been arrested for misappropriating funds, the Hong Kong-based paper said.

A Bank of China official said yesterday government departments are investigating the case.

"It involves financial fraud," the official said, without providing further information.

Economists said the scandal was bad news for Bank of China, which plans to go public this year, and would have a negative impact on the bank's reputation.

Bank of China was selected by the central government as a pilot project to become a joint stock bank.

After being recapitalized by a State injection of US$22.5 billion, the bank reorganized itself into a joint stock company called Bank of China Limited in August last year.

By the end of last October, the bank's bad assets ratio stood at 4.55 per cent, a drop of 11.73 percentage points from the beginning of the year.

The bank's capital adequacy ratio, a measure of how much capital it has relative to assets, stood at 8.56 per cent at the end of October.

The bank also has a plan to usher in foreign company investors as its equity owners, in an aim to increase its capital strength, optimize the capital structure and diversify the ownership.

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