Bank of China has vowed to strengthen internal control to clamp down on fraud, following a number of high-profile scandals.

Spokesman Wang Zhaowen said yesterday that any criminal cases would have a negative impact on the bank's reputation.

"We should try to prevent similar cases from reoccurring," he said.

The spokesman made the remarks after Beijing Huayuanda Real Estate Development Company was disclosed over the weekend to have used fake documents to fraudulently obtain about 645 million yuan (US$77.7 million) of mortgage loans for its Senhao Apartments from the bank's Beijing branch.

The loans were diverted to other places outside Beijing.

This is just the latest case. In January, the bank announced that one of its sub-branches in northeastern Heilongjiang Province had been involved in a fraud case.

Gao Shan, an official that worked there, vanished at the same time as 290 million yuan (US$34.9 million).

Researcher Wang Zhao of the State Council Development Research Centre said the latest fraud case was typical at domestic banks.

"There is a big loophole," he said. "It suggests the banks' internal control systems and corporate governance are far from perfect."

Domestic banks urgently need to improve controls as they face fierce competition from foreign rivals, he said.

According to Wang Zhaowen, Bank of China will carry out a thorough review of all business operations to find out where loopholes are, so they can be closed off.

"The examination will focus on the implementation of all of the bank's rules and regulations, including the exchange of work posts among bank staff," he said.

The bank has already established a special team of experts from consulting firms and banks to check business procedures, institutional structure and existing internal control mechanisms, he said.

The bank will also promote the education of its staff, he said.

The bank, which was chosen by the central government as a pilot joint-stock firm, won a US$22.5 billion capital injection from the State in December 2003.

Source: China Daily