Building the Violation Prevention System and Improving Internal Control Mechanism

On April 10th, Bank of China spokesman Wang Zhaowen, revealed information on recent efforts of the Bank in special operation on violation cases and the improvement of internal control mechanism. According to Wang, BOC made three major business inspections on over 11,300 operating branches and divisions in 2005, with a coverage ratio of 100%.

A series of internal control measures were taken to address the problems detected. First, the front, middle and back offices of the operating branches were separated; the operational center and post monitor center were formed to enhance the process inspection and post inspection. Second, the credit approval authorities of the operating segments below Tier-2 branches were centralized to the upper levels.

The Tier-2 branches and below, as marketing windows, do not have the rights to grant the credit approval authority any longer. Third, strengthen the construction of regulations and systems, prepare and modify major internal control regulations and systems including Guidance of BOC on Internal Control, Guidance on Risk Control of the Infrastructure Operating Branches, Manual of Position Compliance and Regulations on Employee Violations.

Fourth, implement the post shifting, deputy position and compulsory vocation systems for the responsible personnel in the infrastructure operating branches. These measures have produced fruits. In the 52 breaching cases exposed in 2005, 46 cases were self-detected and 44 were historical cases. All related responsible persons are all properly disposed.

Since the beginning of this year, BOC made a thorough inspection across its operating institutions, intended to urge full implementation of internal control system at the infrastructure level, to standardize operational procedures, to promote monitoring effects and to prevent moral hazards. Several branches were involved in such problems as loose internal control procedures, unscientific management measures and nonstandard operational procedures.

Rectificative and improving actions have been immediately put in place.

Wang Zhaowen emphasized that the capacity of immediately detecting problems within the infrastructure organizations, and timely imposing severe punishment and disclosing such problems demonstrated that BOC was improving its internal control ability, meanwhile reflected the weakness in infrastructure construction and management.

The next step is to strengthen the control over violation cases, and severely punish any violation case detected in bills business and other business. Any crimes will be transferred to the judicial authorities, and be strictly investigated for liabilities in accordance with BOC regulations. BOC is to build the violation prevention system with unshakable determination, and improve internal control mechanism.