(CBN - Global) May 18 -- China's commercial banks are reviewing their acceptance bill services, and some lenders had suspended the business altogether, China Securities Journal reports.
In January, a CNY3.915 billion (USD600 million) bill-related fraud came to light at Agricultural Bank of China Ltd. [SHA:601288], one of the largest state-backed banks. At the end of April, the People's Bank of China and the China Banking Regulatory Commission jointly issued a document (No. 126) requiring all commercial banks to investigate risks involved in acceptance bill businesses before June 30, and to take immediate and effective countermeasures against any risks discovered.
According to a well-informed source, the investigation by regulatory authorities is focused this time on the trade background of acceptance bills, compliance in acceptance bill transactions and internal controls. It will affect bank acceptance businesses including bill issuance, discounting and resale agreements over the near term.
Two employees at Agricultural Bank illegally withdrew outstanding bills, discounted them with another bank, and then invested the funds in the stock market. They were unable to repay the money due to falling share prices.
Apart from Agricultural Bank, acceptance bill-related incidents also occurred at CITIC Bank and Bank of Tianjin. The total amount involved in relevant cases that occurred at commercial banks has so far exceeded CNY6 billion in 2016.
According to several professionals within the industry, Document No. 126 is intended to guide commercial banks to promote the use of electronic bills and eliminate risks.
Mr. Pan Gongsheng, a vice governor at the People's Bank of China, has previously stated that the central bank was stepping up efforts to create a uniform bill market in China. He believed that the establishment of an electronic bill transaction system would improve trading efficiency, as well as reduce trading costs and risks.