Report: Bank of China to pay U.S. fine


Negative publicity about loans might disrupt the bank's plans to sell up to $5 billion in stock in its Hong Kong subsidiary

HONG KONG, China -- The Bank of China has agreed to pay a U.S. government fine of up to $20 million for problems at its New York branch, according to a report.

The bank has reached a preliminary deal with the Office of the Comptroller of the Currency, according to The Wall Street Journal.

A draft agreement calls for the bank to pay a fine of between $10 million and $20 million, the newspaper reported, quoting unnamed sources familiar with the situation.

The Bank of China is the country's largest foreign-exchange institution and one of its four big state-owned banks.

Chinese officials confirmed this week that they are investigating Wang Xuebing, the bank's former president and, before that, the head of its New York office.

Loans made under Wang's responsibility

Wang was transferred to the China Construction Bank in February 2000 but was fired from that post last Friday.

China's central bank governor, Dai Xianglong, said this week that Wang is under investigation for "lending cases that happened in some individual Bank of China branches" that were made under his direct responsibility.

U.S. officials have not confirmed that they are also investigating the bank, but the Wall Street Journal reported on Monday that is indeed the case.

The fine would be one of the largest recent civil penalties against a bank in the United States.

There has been speculation that Wang was subject to a government probe since he was transferred out of the Bank of China.

Authorities are reportedly scrutinizing questionable loans made under his leadership, including a $20 million loan to a company part-owned by Wang's wife.

The OCC is part of the U.S. Treasury Department, and the office that oversees federally chartered banks.

Also this week, officials said auditors uncovered 22 serious lending violations at the bank, unearthed in a regular audit of its 2000 operations. Wang left the Bank of China in February 2000.

Chinese authorities are on a crackdown over bank accountability after the country joined the World Trade Organization, which is expected to introduce more competition.