FRIDAY, MARCH 15, 2002
Bank of China admits $500 mn missing
REUTERS
BEIJING: China's largest foreign exchange bank, Bank of China, admitted on Friday that nearly half a billion dollars has gone missing from a southern branch through money laundering and questionable loans.
But the bank said it was still determined to float its Hong Kong unit globally despite a string of damaging public scandals stretching from the southern province of Guangdong to Las Vegas and New York.
Bank President Liu Mingkang said the bank had discovered more than $483 million had gone missing through money laundering and lending violations at its Kaiping branch in Guangdong, and an intense global effort was underway to trace the lost money.
"A large portion of the money was used for money laundering via Macau, the US, Las Vegas and so on," Liu said, adding the missing funds were not linked to other branches or banks.
"And some portion of that money was on a lending basis to factories, but only a tiny," part, he said.
Investigations had already revealed at least five managers were involved in irregularities, Liu said. A Hong Kong police spokeswoman said on Friday police in the territory had arrested three lawyers in connection with the case.
State media had reported the bank might have lost as much as six billion yuan ($724.9 million) at Kaiping, but Liu said the figure was smaller.
Pall over float plan
The latest revelation follows a series of scandals including the downfall of the bank's former president, Wang Xuebing. He was sacked in January as president of China Construction Bank over problem loans during his tenure at Bank of China.
Bank of China has also been hit by a $20 million fine by US regulators and faces a multi-million dollar lawsuit by a US couple.
The problems have cast a pall over its plans to list globally, which analysts estimate could raise the state-owned institution up to $5 billion.
But Liu said the bank would proceed with the Hong Kong unit's plan to list in the United States.
"We have firm determination and we have got approval to float our Hong Kong operations on capital markets worldwide," Liu told a small group of reporters, without elaborating.
"I don't think it's reasonable for some people to say we'll forget the US market. There's no grounds for such a thing."
A banking source told Reuters on Friday that investment bankers behind the bank's float would meet over the next two weeks to hammer out specific listing details.
Couple file lawsuit
Liu also lashed out at a $70 million lawsuit filed in the United States by a Chinese-American couple in New Jersey who accuse the bank of unauthorised transactions.
The couple have accused the bank of hatching a scheme that used their respective firms to conduct unauthorised currency swaps and arbitrage for profit.
Liu called their lawsuit "ridiculous" and said his bank had lent the couple $88 million in the 1990s which they had used to trade metal.
The New York transactions would not affect the bank's bottom line, Liu said.
"Is there any potential loss linked to the incident in New York? My answer is no," Liu said. "We recovered some of the New York loans, equivalent to $53 million."
The controversies highlight the shakiness of China's problem-ridden banks, which the government is encouraging to seek listings to effect much-needed reform.
Premier Zhu Rongji said on Friday Bank of China's woes would not affect plans for listings.
"I believe problems happen in some individual bank branches and they will not affect the goal of domestic and overseas listings by Chinese banks," Zhu said.
China has just three banks listed domestically.
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