Saturday 2 June 2012

Banker’s arrest may cause aftershocks in real estate

Property businesses that received loans from ABC executive at risk of being caught up in his graft case

2 comments:

Guanyu said...

Banker’s arrest may cause aftershocks in real estate

Property businesses that received loans from ABC executive at risk of being caught up in his graft case

George Chen
01 June 2012

The detention of a senior executive at one of China’s Big Four state-controlled banks not only caught the mainland’s banking industry by surprise, it is likely to make some property developers anxious.

Yang Kun, an executive vice-president of Agricultural Bank of China (ABC), was detained several days ago in Beijing by the Central Commission for Discipline Inspection, the party’s internal anti-corruption arm which reports to the top leadership.

Yang is believed to have been involved in gambling and corruption, particularly related to several money-losing property projects that received loans from ABC, people with knowledge of the matter said.

Some of the sources interviewed by the South China Morning Post described Yang’s case as potentially as serious as former Bank of China (Hong Kong) chief executive Liu Jinbao’s case in 2003.

Liu was caught up in an investigation into Shanghai property tycoon Zhou Zhengyi, who bribed senior officials and bankers, including Liu. In 2005, Liu received a two-year suspended death sentence.

Several bankers on the mainland said they expected Yang’s detention to soon prompt the banking regulator to request domestic lenders to strengthen their internal controls, especially regarding loans to the property sector. They said the regulator urged banks to strengthen the monitoring of loan risks after Liu was caught.

“The case [of Yang] does reflect ABC’s weakness in corporate governance, which has been one of our key concerns” since its initial public offering of shares in 2010, said Bank of America Merrill Lynch analysts Winnie Wu and Michael Li in a research note. ABC raised more than US$22 billion by listing its shares on the Hong Kong and Shanghai stock exchanges, which remains the world’s biggest initial public offering.

Yang, whose detention was confirmed by ABC in an official announcement late on Wednesday, has worked for the bank for more than 20 years. Born in 1959, Yang has a reputation for maintaining a low profile.

But he is well known among senior people in the mainland’s financial community for being a fan of gambling, particularly poker and mahjong.

Yang’s circle of business friends, who often play cards and sometimes travel to Macau for gambling, include mainland property tycoons and relatives of senior officials, said the sources on condition of anonymity.

Guangdong’s 21st Century Business Herald, citing unidentified sources, reported yesterday that Wang Yaohui, chairman of the secretive and closely-held property-to-resources conglomerate Zhonghui Guohua Industry Group, based in Beijing, was also detained recently in a case related to Yang. His whereabouts couldn’t be determined yesterday.

“I feel this time the [troubled] water is very deep,” said one senior executive in the financial industry who knows Yang personally. “It’s about the property industry again, and the amount of money involved [in bribery and corruption and illegal loans] won’t be small, I believe.”

He added that the probe might be extended to developers who received loans from ABC with Yang’s help. As an executive vice-president, Yang was mainly in charge of loans, especially those related to real estate.

The scandal’s effect on the stock markets has been mixed. The price of the bank’s shares in Hong Kong edged higher yesterday to HK$3.14 each in a weaker overall market, while the shares fell by nearly 2 per cent in Shanghai, where the broader market declined 0.52 per cent from Wednesday.

Unknown said...

If some banker has make a scandal like this, it would make an effect on stock market. People's trust was going down from investment in stock market.

Mandrien