Even as people are still talking about a recent bank fraud in northeast Heilongjiang Province involving hundreds of millions of yuan, another massive fraud involving 95 million yuan (11.4 million US dollars) took place in a branch of China Everbright Bank in southern Guangdong Province.

And last month, Zhai Changping, an employee with the Dalian municipal branch of the Bank of China (BOC) in northeast China's Liaoning Province, was arrested and charged with embezzling 6 million US dollars.

Shocking bank crimes have been frequently unveiled in recent years, as China is striving to reform its bank system, whose rate of non-performing loans stood at 15.6 percent on average by the end of 2004.

"The frequent occurrence of serious bank crimes is the result of unreasonable old systems, social credit environment, traditional banking culture in China as well as the impotency of supervision mechanism," said Liu Mingkang, chairman of the China Banking Regulatory Commission (CBRC) recently.

Banks on the Chinese mainland reported total assets of 31.49 trillion yuan (3.8 trillion US dollars) at the end of 2004 and total debts of 30.23 trillion yuan, according to CBRC figures.

"The Bank of China (BOC) has loopholes in its self-management and risk-control mechanisms," BOC Spokesman Wang Zhaowen said on April 2 after voluntarily disclosing a fraud loan case involving 645 million yuan.

The BOC is one of the first two state-owned commercial banks aiming for stock market debuts. China initiated an ambitious reform on the financial system at the end of 2003 when the central government injected a combined 45 billion US dollars into the BOC and China Construction Bank (CCB) to help boost their share- holding reform plan.

"This is a last-ditch battle. We cannot afford any failure. We must take decisive measures to ensure successful reform," said Premier Wen Jiabao commenting on fund injection to the BOC and CCB.

But the recent frequent scandals makes people doubt the future of bank reform. CCB Board Chairman Zhang Enzhao's resignation this year has aroused attention from home and abroad.

"One scandal after another makes people doubt the effectiveness of Chinese banks' directorates," said Ba Shusong with the Development Research Center of the State Council.

The CBRC, the country's watchdog of banking sector, attributed major fraudulent cases to the lack of supervision, failure in punishing malfeasant activities, and weakness in risk and internal control.

Although the BOC and CCB have made progress in their share- holding reform, there is still a long way to go before their stock market debuts, and the recent bank crimes especially prove the importance and difficulty of bank reforms, said CBRC Vice Chairman Tang Shuangning.

Such scandals do not necessarily mean the failure of bank reforms, however, but on the other hand show the achievement made in enhancing banking supervision, Li Yang with the Chinese Academy of Social Sciences said.

"The disclosure of these fraud cases shows that China's banks have become more transparent, and the transparency itself should be welcomed," Li said.

"The best chance for reform is when scandals occur," Shih May- lung, former vice chairwoman of the China Securities Regulatory Commission once said.

Source: Xinhua