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In december 2025, the chongqing superintendence of the national financial supervisory authority issued a fine of $8. 9 million for eight core non-compliance cases, namely, poor internal control, irregular lending and serious failure to exercise due diligence on credit。
More significantly, the then chairman of the board, zing shih, was banned for life, vice-president wang liangping was disqualified for 10 years and six others were punished with warnings, fines, etc。
Do the eight violations refer directly to the whole process of credit and the inner core, to a serious disconnect between the design and implementation of the system, or to the inevitable cost of rapid expansion of the industry? In the face of the multiple challenges of senior management team shocks and capital recapitalization, how can this bank, which was determined to hit the “first floor of the west city comptoir”, rebuild trust and get out of the trap
Eight violations torn open the internal control crack
The eight non-compliance cases that chongqing three gorges bank was seized this time focused on the bank's systemic weaknesses in its governance structure and business processes。
In terms of the nature of the violations, three broad categories can be clearly distinguished: failure of internal control systems, failure of credit operations and failure of liability transmission. Among them, “ineffective internal control” is a cross-cutting and central issue, a formulation that appears to be general and covers multiple risks such as faults in the implementation of the system, absence of job checks and balances and delays in risk monitoring. When internal oversight mechanisms were not functioning effectively, there was room for violations。
Directly linked to this is the problem of “violation of credit” and “trigger” credit operations, which are seriously inadequate. Pre-prime investigations flow to form, which may lead to miscalculation of the borrower's qualifications; ease of review in loans, which can easily “excess” non-eligible loans; and a lack of post-prime checks, where risks such as deviations in the use of funds and reduced repayment capacity cannot be identified in a timely manner. Such violations not only directly increase the probability of adverse asset generation, but also expose the potential tendency for bank credit operations to be “scaling, light quality”。
In terms of the consequences of sanctions, the “full chain of accountability”, from the director to those responsible at the grass-roots level, also confirms the ills of the “reduced layer of responsibility” of violations. Grass-roots operations risk is not effectively uploaded, and risk management at the executive level is clearly missing。
The signal significance of the release of the penalty is particularly important in view of the severity of the penalty。
The fine of $8. 9 million, which is already at a high level in the administrative penalties of the regional banks, goes well beyond the usual “warning penalties”, as can be seen from the regulatory authorities' determination of the seriousness of the violations committed。
Of even greater concern are the penalties imposed on personnel, the lifetime ban and the 10-year ban on entry into the market, which break with previous inertia of “failure institutions do not punish individuals”, highlight the increased accountability of the “critical minority” of financial institutions at the regulatory level and conveys a clear orientation of “reciprocity of authority and failure to act”。
For the entire group of banks in the region, the ticket is a profound warning. Under regional competitive pressures, scale expansion must not be traded at the expense of compliance and wind control。
It's a three-fold concern
From core financial data, the chongqing three gorge bank has performed well for almost five years. Assets have grown steadily, profitability has remained stable and the liability structure has continued to optimize. However, in combination with the problem of exposure to tickets, the concern under the table of data has gradually emerged, concentrating on the triple imbalance between size and quality, profitability and compliance, and capital and risk。
The first is the imbalance between asset size expansion and asset quality control. Between 2020 and 2024, the bank's assets grew by over 40 per cent, expanding at a moderate rate among regional banks. But behind the growth of scale is a well-established risk-control system that matches it? The answer is clearly negative in the light of the sanctions imposed for the non-compliance。
If these irregular loans are followed up with negative assets, not only do more provisions erode profits, but they may also affect the liquidity of assets, while past data from the bank indicate that the equity ratio remains at around 7 to 8 per cent and that although regulatory requirements are met, risk-resistant buffer space may be reduced after exposure to potential risks。
The second is the potential conflict between profit stability and rising compliance costs. In the short term, a fine of $8. 9 million had a limited impact on the net profit of $1. 323 billion in 2024, representing less than 1 per cent, but in the long run, the costs of corrective violations could not be ignored。
Reconfiguring internal control systems requires investment in technology and manpower, and reshaping credit processes requires the optimization of systems and the training of personnel, which directly increases operating costs, thereby affecting profitability. More crucially, the bank's profitability model is more dependent on traditional credit operations, and tightening credit lending may further affect income growth and expose the issue of a single profit model。
Finally, there is a real gap between capital strength and risk resilience. The data show that the ownership of the business increased from rmb 19,183 million in 2020 to rmb 23,872 million in 2024, with a capital base that appears to be steadily solid. It should be noted, however, that the bank's previous ipo has been terminated, and capital replenishment channels are narrower than national banks. The need to use capital to offset the poor formation of irregular loans could lead to a reduction in capital adequacy and thus limit the scope for subsequent expansion。
For regional banks, capital adequacy is not only a regulatory indicator, but also a potential pressure to address regional economic volatility and customer credit risk, an indicator that deserves sustained attention。
It's the way it works
In the face of the impact of the ticket, the chongqing three gorge bank needs to walk a path of “rehabilitation + transformational development”, and its experience has also provided valuable inspiration to the regional banking community。
In the short term, the bank will need to develop a “list” rehabilitation programme for eight violations。
With regard to the failure of internal control systems, sectoral responsibilities should be redefined and risk monitoring networks “horizontal to horizontal and vertical” established to ensure that the system is no longer formalized. In the case of poor credit operations, the “triple-check” process needs to be reshaped, full process marks strengthened and cross-checked, for example, by improving the accuracy of pre-credit surveys through large data technology, and ensuring post-credit management by regular on-site inspections. In the case of a failure of accountability, a penetrating accountability mechanism should be put in place that directly links compliance with performance and performance appraisals and avoids a “performance-up” mask of risk。
In the medium term, balancing size and quality is key. The bank needs to properly slow the pace of asset expansion and devote more effort to the risk-taking of stock loans, particularly in the area of credit, where the violation involved, by identifying potential malfeasance ahead of time and increasing disposal。
At the same time, the risk provisioning mechanism needs to be optimized to adjust the coverage to the dynamics of asset quality changes to match the risk reserve to the size of the asset. At the liability level, while the share of personal deposits has increased significantly, there is a need to further optimize the deposit structure, reduce reliance on short-term, high-cost liabilities and provide more stable financial support for business development。
In the long run, transition is at the heart of the break。
The chongqing three gorges bank needs to move away from its overdependence on traditional credit operations, building on the opportunity of building economic circles in two cities in the senzhou region and exploring niches such as inclusive finance and green finance. Examples include the development of customized credit products for micro-enterprises in the region, the provision of dedicated financial support for green industry projects and the creation of new profit growth points through differentiated competition。
At the same time, digital inputs should be increased, and smart wind control systems should be used to improve the efficiency and risk identification of credit approvals, and technological means should be used to compensate for traditional wind control deficiencies。
For regional banksFinancial regulationIn a context of continued strengthening, only by integrating the genetics of compliance into the operational line and maintaining the risk threshold in development can the financial underpinnings of regional economic development be truly realized and sustainable. In the future, the effectiveness of the restructuring of the bank and the stability of asset quality will be important yardsticks for measuring its ability to operate and will warrant ongoing industry-wide attention. ♪ thinking of money ♪
