Friday, September 26, 2003

Bank of China promises reforms

HONG KONG (AP) - The Bank of China's Hong Kong unit said Friday it will reform its lending practices to rebuild its image following a loan scandal linked to Chinese tycoon Zhou Zhengyi.\

BOC Hong Kong (Holdings) Chairman Xiao Gang promised "immediate and proactive measures'' to revamp the lending procedures at its subsidiary, the Bank of China (Hong Kong), after questions surfaced about a loan it issued to a company owned by Zhou.

"We recognize the importance of restoring public confidence and rebuilding our image in both the local and international arenas,'' Xiao said.

Zhou's company, New Nongkai Global Investments Ltd., was granted the 1.77 billion Hong Kong dollar (US$226.9 million) loan in June 2002 to buy a controlling stake in Hong Kong-listed Shanghai Land Holdings Ltd., which is now in receivership.

Chinese authorities arrested Zhou earlier this month on charges of fraud and stock manipulation, state-owned media reported.

The Hong Kong Monetary Authority is investigating the loan. Meanwhile, Zhou's wife and business partner, Mo Yuk-ping, is being investigated by Hong Kong's anti-graft agency, the Independent Commission Against Corruption.

A committee set up by BOC Hong Kong to investigate the loan criticized then Chief Executive Liu Jinbao and another executive involved in granting the loan for exercising bad judgment.

Liu was transferred back to Beijing in May and is being investigated by Bank of China.

On Friday, BOC Hong Kong said the credit executive, Or Man-ah, has resigned.

Oh was criticized for backing the loan without regard for risk.

Xiao promised make sure the bank adheres to Hong Kong Monetary Authority guidelines and will require its credit and risk managers to file quarterly reports to the board.

Other reforms being considered include giving the bank's chief risk officer more power and increasing the number of independent boardmembers, Xiao said.

Last year, Forbes Magazine ranked Zhou, also known as Chau Ching-ngai, as China's 11th-richest man, with a fortune estimated at US$320 million.

The bank has asked Zhou's company to repay HK$740 million (US$94.9 million) outstanding from the loan. - AP

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Bank of China promises reforms