Jan 09, 2013 04:26 PM

Head of Postal Savings Bank Arrested over Criminal Charges


(Beijing) – The president of Postal Savings Bank of China was arrested in late December on criminal charges, including illegal fund-raising, taking bribes and making loans illegally, a source close to investigators says.

The bank has not appointed a successor to Tao Liming, 59, who was taken into custody for questioning by the Communist Party's anti-graft watchdog in June. The chief of the bank's financial institutions department, Chen Hongping, was detained at the same time.

The scandal has put under a cloud the bank's ambition to list, for which there is no timetable yet. But any plan to go public within three years can be ruled out because the securities regulator requires IPO candidates to have no important personnel changes in the three years before listing.

The party's discipline committee launched a full investigation into Tao last year after finding that he had helped his younger brother solicit bribes worth more than 10 million yuan from a highway construction company in Hunan Province in 2009 and 2010.

He has also been accused of illegal fund-raising and abusing power to write loans that violated regulations.

China Post Group founded the bank in March 2007 by separating its rudimentary banking operations from its postal services. Later reforms to the bank's businesses and management have seen it expand from a deposit-only institution to one offering a wide range of services, including wholesale banking to corporate clients.

Postal Savings Bank has written about 200 billion yuan worth of corporate loans since it was permitted to undertake the business in 2009. The bank is the nation's seventh largest, with assets of as 4 trillion yuan by the end of October 2011.

As the bank's first president, Tao oversaw all of the changes. He has been criticized, however, by people both inside and outside the bank for stretching businesses beyond the bank's capacity.

Concerns have been raised over issues at the bank such as loan risk control and employee incentives. An official from the China Banking Regulatory Commission (CBRC) said the regulator was also worried that the level of management, technology and personnel training at the bank may fall short of that needed for expansion.

CBRC has thus required Postal Savings Bank to cap each loan at 20 million yuan, but the restriction did not prevent the bank's executives from being courted by business owners hungry for cash during recent years when credit was tight.

Tao has apparently also abused his lending authority. A source close to the case said earlier that his fall was also tied to probes into conglomerate Dalian Shide Group's former chairman, Xu Ming, and Agricultural Bank of China's former president, Yang Kun.

Postal Savings Bank enjoys much more leeway on loans compared to other leading commercial banks. One reason is that it has a loan-to-deposit ratio of less than 20 percent, far below that at larger banks and the regulator's limit of 75 percent.

"There is very spacious room for making loan decisions and a lot of room for funds maneuvering as well," an executive at the bank said.

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