Plagued by 51.6 billion yuan (US$6.45 billion) worth of financial crimes and book keeping irregularities the Agricultural Bank of China has punished 1,331 employees and pledged to close financial loopholes and improve internal controls.

The Beijing-based bank has resolved nearly 80 percent of the problems uncovered by the National Audit Office in a probe of the lender's 2004 financial performance, the bank said in an e-mail statement yesterday.

Twenty-one people have been referred to law enforcement authorities for criminal prosecution, 64 employees were fired and 74 have been transferred from their jobs or demoted, the statement said. Disciplinary sanctions including financial punishments were meted out to the others.

Agricultural Bank also reshuffled management teams at seven provincial branches, including the removal of three branch heads, according to the statement. It didn't reveal the names of the employees or pinpoint where they worked.

China's top audit agency said in a report on Monday that it had discovered 51 cases involving fraud worth 8.7 billion yuan (US$1.09 billion) and involving 157 employees in Agricultural Bank's headquarters and 21 branches.

The bank also was found to have accepted 14.3 billion yuan (US$1.79 billion) worth of deposits with incomplete or fake identities while granting 27.6 billion yuan (US$3.45 billion) in loans to car buyers and developers without proper collateral.

An improper discounting business involving unverified commercial bills was valued at 9.7 billion yuan. And the much troubled lender also held 84.9 million yuan (US$10.6 million) in cash reserves which it didn't include in its 2004 financial report.

"We have focused strongly on the problems and investigated the risks," the bank said in the statement. "Anyone involved in any fraud or other irregularities is subject to severe punishment."

The bank has set up more than 10 internal inspection teams at its headquarters and branches, the statement said. It has urged provincial branches to step up efforts to secure collateral for all car and property loans.

The bank has also ordered local outlets to pay back client funds which were misappropriated by employees.

And an internal risk management system is being put into place while auditing by outside agencies is being conducted, according to the statement.

(Shanghai Daily June 29, 2006)