China uncovered 860 billion yuan (US$118.6 billion) in financial irregularities last year after deep auditing, the top banking regulator said on Friday.

The China Banking Regulatory Commission said yesterday on its website that 117 bank managers had been removed from office while a total of 12,687 people faced various fines after investigations.

The top regulator inspected 79,200 banking institutions including branches and subbranches last year, up from the previous year's probe on 69,200 players.

The value of the irregularities for the previous year was not available.

Profits for Chinese banks grew to 298.7 billion yuan at the end of 2007, up from 36.4 billion yuan of 2002, when the CBRC started operating.

A total of 445 cases of irregularities were found in the banking system, down 58.4 percent from a year ago.

The average bad loan ratio for major Chinese banks dropped to 6.7 percent at the end of 2007 compared with 23.6 percent five years ago, the regulator said.

It also marked a drop from a year earlier's 7.51 percent, according to the regulator's statistics.

The level of irregularities at the big four state owned banks which have gone public - Industrial & Commercial Bank of China, Bank of China, China Construction Bank and Bank of Communications - decreased to 2.87 percent.

The total assets of Chinese banks' topped 52.6 trillion yuan at the end of 2007, from 2002's 23.7 trillion yuan and up for the previous year's 43.95 trillion yuan.

A total of 136 banks met the regulatory capital adequacy ratio of eight percent - 78.9 percent of the industry.

At the end of 2007, five Chinese banks have control or hold stakes in overseas financial players. Seven Chinese banks have 60 overseas outlets with overseas assets topping US$167.4 billion.

Chinese banks are revamping and preparing to face fierce competition when overseas banks meet them on a level playing field under China's World Trade Organization commitment.

China fully opened its banking sector to overseas players at the end of 2006, lifting geographic limitations.

Twenty-one overseas banks have been incorporated in China and are seeking unlimited retail yuan services. The list includes HSBC, Citibank, BEA, Standard Chartered Bank, OCBC, Deutsche Bank and Hang Seng Bank.

The regulator said it will also draw lessons from the US subprime crisis to improve its overseeing of new, innovative finance products.

(Shanghai Daily January 19, 2008)