Senior Official Appointed to Baoshang Bank Take-over Team Toppled over Corruption Allegations

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Two senior officials have been toppled from their positions over their involvement Inner Mongolia’s Baoshang Bank, which was forcibly acquired by the Chinese government over two years ago.

Li Guorong (李国荣), formerly the deputy head of the take-over team for Baoshang Bank as well as the former deputy-head of the Sichuan province banking regulator, is under investigation for “taking the opportunity of his participation in risk disposal work to use his authority to seek private gain,” according to an article published by the Chinese Communist Party’s Central Commission for Discipline Inspection (CCDI) on 27 September.

“Some financial regulatory cadres have made use of their participation in risk disposal work as an opportunity to seek private gain via their authority,” said the article. “Li Guorong, formerly deputy head of the Sichuan banking and insurance regulatory office, is a classic example.”

According to CCDI it sent a team to Inner Mongolia to work with officials in Hohhot to investigate Li in July of this year.

The investigation found that Li had “used his risk disposal authority to extravagantly amass huge wealth after being appointed to the Baoshang Bank takeover team.”

“Li was entrusted by the heads of private enterprises with intervening and interfering in the lending affairs of banking institutions that had been taken over, and affiliated banking institutions.

“He used his professional authority to seek profits from others with regard to loan interest rate reductions and exemptions and debt restructuring during the period of loan provision or extension in relation to banking sector institutions that had been taken over.”

Li is a near two-decade veteran of the Chinese banking regulatory system, having first joined the China Banking Regulatory Commission (CBRC) in 2003.

During the period from April 2016 to October 2018 he served as the deputy head of CBRC’s Sichuan branch, as well as head of its successor organisation following CBRC’s conversion into the China Banking and Insurance Regulatory Commission (CBIRC) in October 2018.

In March 2018 Li served as head of the risk monitoring team responsible for handling risk disposal work in relation to Chengdu Rural Commercial Bank, while in May 2019 he was appointed to the team responsible for taking over Inner Mongolia’s Baoshang Bank.

In May 2019 the Chinese central bank and the CBIRC took the unprecedented move of forcibly acquiring Baoshang Bank in what some referred to as a “Mini-Lehmann moment.” 

The move triggered heightened concern over the health of China’s regional banks, and was followed by a spate of upsets amongst smaller provincial lenders as well as moves by regulators to consolidate unsteady institutions.

A report released by the CCDI on 25 May indicated that five banking regulatory officials in Inner Mongolia received over 700 million yuan (approx. USD$109 million) in bribes, 80% of which were in relation to Baoshang Bank.

On 28 September, the day after CCDI published its report on Li Guorong, CCDI further announced that Cai Jiangting (蔡江婷), a first-grade inspector with CBIRC’s legal regulatory department, had been placed under investigation by Inner Mongolia authorities for suspected severe breaches of the law.

Cai is also a veteran banking regulator, having worked with the Chinese central bank from 1986 to 2003, before joining CBRC in September 2003.

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