China Fines Citibank, Four Others For Breaching Mortgage And Credit Card Rules

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Citigroup and four other Chinese banks have been fined a combined 14 million yuan (US$2.1 million) by China’s banking regulator in Shanghai for breaching mortgage and credit card rules, in an unprecedented crackdown by the authorities to rein in runaway credit.

Citi received the largest fine of 10 million yuan, and was accused of violating mortgage lending rules and for showing insufficient care when issuing credit cards to customers, according to an August 11 notice on the website of the China Banking Regulatory Commission (CBRC).

The breaches took place in the first 10 months of 2015, the regulator said.

The four Chinese banks that were fined were Hua Xia Bank (2.06 million yuan), Bank of Tianjin (500, 000 yuan), Bank of Shanghai (500,000 yuan), and the Agricultural Bank of China (nearly 600,000 yuan).

“The regulator’s fine on Citibank for lending and credit card irregularities extends Beijing’s recent campaign against financial risk to domestic commercial and consumer lenders,” said Brock Silvers, managing director of Kaiyuan Capital. “Despite being the largest commercial bank fine to date, the sanction isn’t significantly impactful, and could indicate a desire to be even-handed rather than presaging a broader movement against the banking sector.”

The penalties reflect the increasing scrutiny placed on China’s banking industry, as the regulator stepped up its effort to repair any weak links and avert potential risks in the financial system amid a slowing economy. On a larger scale, the bank regulator had joined with watchdog agencies in securities, insurance and with the central bank to deter outsize acquisitions, force companies to pare down debt, and slow capital remittances.

The bank regulator had also been active to clamp down on mortgage lending to cool the overheating residential property market, a hot button issue ahead of the Communist Party’s leadership selection process this autumn.

Total financing has been forecasted to grow 13 per cent to 223 trillion yuan by December, from 196.8 trillion yuan at the end of 2016, according to an analysis by Autonomous Research analyst Charlene Chu, cited by Bloomberg. The pace is slower than the 2016 clip of 19 per cent, reflecting the effectiveness of the Chinese government’s deleveraging campaign, she said.

The Shanghai office of the Chinese banking regulator has issued 31 fines so far this year, compared with 25 for the whole of 2016.

The most common misdemeanours this year had been in mortgage and interbank lending, the regulator said.

Citibank’s fine is the largest ever issued by the Shanghai office of the CBRC, according to mainland media reports.

“Citi is committed to meeting our regulatory obligations,” the bank’s Hong Kong-based spokesman said. “We have completed the necessary corrective actions to address the issues identified.”

Property controls in Shanghai are particularly strict, and last week the chief executive of developer China Jinmao Holdings said Shanghai’s price controls over new homes were the toughest among all mainland Chinese cities.

However, the CBRC’s central operations in Beijing have been more willing to impose swinging fines.

In April, it said it had fined 17 institutions a total of 42.9 million yuan, with Ping’an Bank alone being slapped with a 16.7 million penalty.

Source: SCMP

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