ONE of the Commonwealth Bank of Australia s (CBA) part-owned Chinese banks has become embroiled in a US$227 million credit scandal which has extended to at least two other banks in the region.
Senior CBA executives have been briefed about the fraud, which centers on its 20 percent-owned Qilu Bank based in the city of Jinan, Shandong Province.
Police in Jinan have begun an investigation into Bank of Qilu for reportedly accepting about 1.5 billion yuan (US$227 million) worth of forged commercial bank bills short-term loans issued to corporate customers.
The China Banking Regulatory Commission has also launched an investigation into the matter. CBA has a 20 percent stake in Qilu, the maximum foreign ownership allowed under Chinese rules.
The Commonwealth Bank also has a 20 percent stake in Bank of Hangzhou and has been working closely with both Chinese banks over recent years to improve their financial performance and risk controls. A CBA spokesman Tuesday declined to discuss the matter.
As the matter is under investigation, it is not appropriate for the Commonwealth Bank to comment, the spokesman said.
Jinan police briefed local reporters about the scandal last month. According to some Chinese reports, Qilu Bank s auditor PricewaterhouseCoopers had cited irregularities in the bank s accounts.
Chinese media reports have named other banks Huaxia and China CITIC as also being investigated for links to the credit fraud.
On Friday, Chinese credit rating agency Dagong Global Credit placed Qilu Bank on its credit watch list for a possible downgrade, citing the potential negative impact on the bank s credit quality from the fraud.(SD-Agencies)
