• Published on 2 May 2017
• 1732 Views
• Print

China Minsheng Bank rating unaffected by fraud allegations at its sub-branch

S &P Global Ratings said today that its ratings on China Minsheng Banking Corp. Ltd. are unaffected by allegations that a sub-branch manager sold forged wealth management products to its high-net-worth customers. We view corporate governance and transparency as a weak spot in China's banking industry, and have therefore already factored this assessment into our ratings on Chinese banks. Nevertheless, we believe this specific risk
management incident calls into question the effectiveness of Minsheng Bank's internal controls and compliance culture. This could weigh on the bank's risk profile, compounding the impact of escalated credit losses in recent years.

According to Minsheng Bank, the incident involved Chinese renminbi (RMB) 1.65 billion in funds and more than 150 customers at its Beijing Hangtianqiao sub-branch. The bank says it is examining feasible resolutions for investors' initial investment funds.

The impact on capital should be insignificant, given that the total amount involved only accounts for about 0.4% of the bank's equity as of March 31,
2017. Minsheng Bank's capitalization has been under pressure due to asset expansion at a time of rising credit risks in the Chinese economy. The bank's
regulatory tier-one capital ratio stood at 9.22% at end-2016, barely improved from 9.19% a year earlier despite the issuance of RMB9.9 billion in preference shares in 2016.

Only a rating committee may determine a rating action and this report does not constitute a rating action.

Re-disseminated by The Asian Banker