With some rural banks involved in financial investigations, small and medium-sized banks in China have found themselves being a place with a high rate of local financial corruption.
In Liaoning province alone, 63 top executives of small and medium-sized banks have been detained from 2021 to May 2022. This number means 83% of these banks in the province have financial problems.
In Henan and Anhui provinces, some rural banks have encountered protests after a large number of customers were unable to withdraw cash for many days.
The China Banking and Insurance Regulatory Commission explained on May 18 that these rural lenders were involved in “internal and external collusion” and “the use of third-party platforms and fund brokers to absorb public funds.” In other words, these banks were engaged in illegal fundraising.
The relevant banks include Henan Yuzhou Xinminsheng Village Bank, Zhecheng Huanghuai Village Bank, Shangcai Huimin Village Bank, Anhui Guzhen Xinmin Village Bank, Huaihe Rural Bank and Xin Huaihe Rural Bank.
These troublesome banks have a similar point. Their largest shareholder is Henan Xuchang Rural Commercial Bank Co., Ltd, a local subsidiary of Xuchang Investment Group.
Xuchang Rural Commercial Bank is not transparent in its financial disclosure, though its parent Xuchang Investment Group is a state-owned investment company with an AAA credit rating.
According to a China Business News report last November, Xuchang Rural Commercial Bank has not released financial data for many years.
Song Weijun is a researcher at Tianjun, a politics and economics think tank. He said on June 7 that Xuchang Rural Commercial Bank actually has a problem with undisclosed shareholders. More than 75% of its shares are held by undisclosed shareholders.
Song Weijun said that a large amount of information not only indicated the confusion of the bank’s equity, but also led to a company outside the shareholder list, New Fortune Group. This company is associated with many village banks allegedly initiated by Xuchang Rural Commercial Bank. It is a trader behind Xuchang Rural Commercial Bank.
Song Weijun said New Fortune Group allegedly infiltrated a total of 13 banks and absorbed public funds through various methods, involving nearly 40 billion yuan (about 6 billion dollars) of funds. Not long after the company was deregistered, there was an incident in which a rural bank had difficulty withdrawing funds.
Through the transactions between banks and its affiliates, huge amounts of money can be embezzled.