BEIJING: China’s foreign-exchange regulator, in a rare move, named several banks for negligence or violation of rules amid its continuous efforts to stem capital outflows. The State Administration of Foreign Exchange on Friday said it found irregularities in local branches of nine banks when handling foreign-exchange transactions, combined worth almost $360 million. The regulator has penalized nonfinancial firms and individuals for moving funds offshore by faking deals or through underground banks before, but it is the first time the regulator has exposed banks’ wrongdoings. A local branch of the Industrial Bank Co. failed to conduct due diligence on checking the documentations of 15 trade deals worth $162 million, the regulator said. Those deals turned out to be fake and the regulator slapped a fine of 900,000 yuan ($133,470) on that branch.
More than a dozen employees at a branch of China Minsheng Bank purchased foreign exchanges for an executive at the branch and friends of that executive through the employees’ own annual quotas for foreign exchanges, the regulator said. Other banks penalized include local branches of Bank of Ningbo Co. and Agricultural Bank of China. Beijing has been ramping up efforts to halt a flood of money leaving the country in response to an economic slowdown and a depreciation in the yuan exchange rate since the second half of 2015. The regulator has had a relatively easier time controlling outflows this year amid a broad-based U.S. dollar weakness. The yuan rose against the U.S. dollar by almost 3% this year after dropping more than 7% last year. At a recent briefing, the regulator vowed continuous scrutiny in compliance checks involving cross-border capital flows.