CHINA’S banking regulator vowed to take action against those who built large financial conglomerates through complex ownership structures and fraudulent capital injections, signaling last year’s government crackdown on such entities is poised to continue.
Such operations have become major obstacles to the nation’s efforts to deepen financial reform and safeguard banking stability, Guo Shuqing, chairman of the China Banking Regulatory Commission, said in an interview published by the official People’s Daily on Wednesday.
Some shareholders used banks as their “ATM machines” and “recklessly conducted unfair connected transactions to line their own pockets,” he was quoted as saying.
Guo, almost one year into the job, has launched a campaign to root out malpractice and strengthen controls over the banking industry amid surging risks from poor corporate governance, violation of lending policies and cross holding of financial products. He didn’t specify in the interview which entities might be targeted.
“The tone of Guo Shuqing’s interview sounds stern,” said Zhou Hao, an economist at Commerzbank AG in Singapore. “The biggest obstacle for such reforms is that they hurt the interests of conglomerates that profit from the existing environment. I do expect China to take measures that directly tackle these problems despite the pains.”
Last year the heads of two well-known Chinese conglomerates—Tomorrow Holding Co. and Anbang Insurance Group Co.—were detained by authorities.
An affiliate of state-owned Citic Group agreed to buy a $1.4-billion stake in Hengtou Securities Co. earlier this month, a move people with knowledge of the matter said is part of the breakup of financier Xiao Jianhua’s Tomorrow Holding.
China’s government has ordered Tomorrow Holding to divest many of its financial assets as part of a plan to break up Xiao’s empire, the people said.