Caixin
Jul 13, 2020 06:24 PM
FINANCE

Banking Regulator Warns of Flawed Risk Management in Fake Gold Case

What’s new: China’s top banking regulator warned financial institutions about their flawed risk management as it cited a notorious case involving billions of yuan of loans that were backed by fake gold as collateral.

The fake gold case made it clear that the internal controls and risk management in some financial institutions “exist in name only,” according to a statement (link in Chinese) released by the China Banking and Insurance Regulatory Commission on Saturday.

What’s the background: Over the past five years, more than a dozen Chinese financial institutions, mainly trust companies, loaned 20 billion yuan ($2.9 billion) to Nasdaq-listed Kingold Jewelry Inc. using gold and insurance policies as collateral to cover any losses, Caixin previously reported. But it turned out that at least some of the 83 tons of gold bars were nothing but gilded copper.

The news shocked Kingold’s creditors, who still hold 16 billion yuan in outstanding loans. Police are investigating the case.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full Caixin article in Chinese, click here.

Related: Cover Story: The Mystery of $2 Billion of Loans Backed by Fake Gold

Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Marcus Ryder (marcusryder@caixin.com)

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