After Xu Jiayin is arrested, will the financial investigation related to housing be expanded? Illegal lending led to a number of bank executives

Source | fengcaixun

Author | Wang Tingting

A rumor has once again triggered the real estate financial circle.

After Xu Jiayin is arrested, will the financial investigation related to housing be expanded? Illegal lending led to a number of bank executives

The Wall Street Journal, citing insiders, reported that Beijing is expanding its investigation into the real estate sector to include bankers and financial institutions that facilitate developers' risk-taking behavior, following a possible criminal investigation into Xu Jiayin, chairman of China's Evergrande. (pictured above)

This piece of information from the Wall Street Journal has not been officially recognized and is not necessarily true. However, the fact is that since the beginning of this year, there has been a marked increase in the number of announcements by officials under investigation in the banking system, among which illegal lending is the hardest hit area.

According to the incomplete statistics disclosed on the website of the Central Commission for Discipline Inspection and the State Supervision Commission, as of October 30, about 113 officials in the financial system have been reviewed and investigated this year, and 54 officials have been punished (such as expulsion from the party and dismissal from public office).

Among the cadres investigated and punished, 96 were from the banking system, accounting for more than 8 percent, which can be described as the "hardest hit area", and officials from the insurance system, exchanges, and financial regulatory departments were investigated.

In the banking system, the smallest cadre is a senior branch commissioner, and the largest involves the head office president, party secretary and other deputy ministerial-level officials. Among the reasons for being examined and punished, there are frequent cases such as illegally issuing loans and taking advantage of one's position to seek benefits for others.

These illegal lending investigations involve a number of industries, among which the involvement with real estate can be described as inextricably linked and intertwined.

Major state-owned banks inevitably "censorship turmoil"

Recently, around Xu Jiayin's arrest, rumors began to circulate that many banks were affected by Evergrande.

For example, Cangzhou Bank, which was found to be "owed 3.4 billion yuan in loan funds by Evergrande Group" in early October, and Liu Liange, former party secretary and chairman of Bank of China, who has recently been involved with Xu Jiayin's overseas assets. However, on October 7, Cangzhou Bank issued a clarification announcement, denying the authenticity of the loan data. The credibility of rumors such as Xu Jiayin's "bite" Liu Liange is also very questionable.

In fact, Bank of China is not even on the list of major banks of Evergrande Group. However, it is worth mentioning that since March 31, Liu Liange was censored, as the first "financial tiger" this year, marking the deepening of the review turmoil in the banking system this year.

In particular, the China Construction Bank has significantly increased its scrutiny in recent years.

For example, on September 27 and 28, according to the website of the Central Commission for Discipline Inspection and the State Supervision Commission, Zhao Zhiran, a former senior commissioner of the Shenzhen branch of China Construction Bank, was expelled from the party and dismissed from public office. Yi Jingan, former deputy secretary of the Party Committee and vice president of the Shenzhen branch of China Construction Bank, was expelled from the party and his retirement benefits were cancelled.

In February this year, Wang Ye, former party secretary and president of the Shenzhen branch of China Construction Bank, was subject to disciplinary review and supervision investigation for serious violations of discipline and law.

After investigation, Wang Ye took advantage of his position to seek benefits for others in the approval of loan financing, and illegally accepted huge amounts of property; Loans were issued in violation of state regulations, and the amount was particularly huge.

Also during Wang Ye's tenure, CCB Shenzhen Branch was confiscated of illegal gains and fined as much as 7.3135 million yuan for 10 problems, including the loan funds being used for real estate development, serious failure to perform due diligence in the "three checks" of corporate loans, and the detention of credit funds.

According to the announcement of the China Banking and Insurance Regulatory Commission, the Shenzhen branch of CCB has issued urbanization construction loans to real estate development projects with incomplete "four certificates" for the later development and construction of the project, and allowed housing lease loan funds to be used for real estate development... These violations involved a number of real estate projects and real estate companies in Shenzhen.

Yi Jingan, who succeeded as the party secretary of the Shenzhen branch of CCB, was also examined and eventually punished for "seeking benefits for others in loans, financing, etc., and illegally accepting huge amounts of property".

Before Wang Ye and Yi Jingan, there was another president of the Shenzhen branch of CCB who was very famous, that is, Tian Huiyu, the former secretary of the Party Committee of China Merchants Bank.

According to the data, Tian Huiyu used to work in China Construction Bank and served for more than 15 years, serving as the vice president of the Shanghai branch and the president of the Shenzhen branch, and led the rapid development of the Shenzhen branch of the China Construction Bank during his time in Shenzhen.

In 2022, Tian Huiyu was investigated for the position of "number one" of China Merchants Bank and was accused of insider trading. During his tenure, the non-performing rate of housing loans of China Merchants Bank continued to rise, and stepped on real estate companies such as Lei Evergrande Group, Tahoe Group, and Huaxia Fortune.

Local banks caught up in a "penalty wave"

Large state-owned banks have always been an important source of real estate funds, but the role of local banks in the development of real estate enterprises in various regions should not be underestimated. Therefore, when real estate companies have thunderstormed one after another, it has also had an impact on many local banks.

For example, on May 19 this year, according to the former Xiamen Banking and Insurance Regulatory Bureau, Xiamen International Bank was confiscated 157,400 yuan of illegal gains and fined 13.8149 million yuan. The reasons include the illegal issuance of working capital loans to real estate projects, and the misappropriation of loans for equity investment.

Just a month later, on June 29, Xiamen International Investment, a subsidiary of Xiamen International Bank, submitted a listing application to the Hong Kong Stock Exchange and began to sprint for an IPO.

According to the prospectus, Xiamen International Investment mainly conducts banking business through its subsidiaries Chiyu Bank and Luso International Bank. As at the end of 2022, Chiyu Bank's loans to the property development and property investment industries accounted for 16.9% of the total loans, and Luso International Bank's loans to the property development industry accounted for 22.9% of the company's total loans. This means that the loan business of Xiamen International Investment is closely related to the real estate industry.

Therefore, under the real estate reshuffle, the non-performing loan ratio of Xiamen International Investment continued to rise from 2020 to 2022, at 0.40%, 0.61%, and 1.38%, respectively, and affected the decline in the company's profits.

Interestingly, on May 19 this year, Wang Xiaojian, chairman of Xiamen International Bank, also received a fine -

Regulatory filings disclose that Wang Xiaojian was fined 100,000 yuan for disposing of defaulted bonds in violation of regulations during his tenure at Xiamen Rural Commercial Bank.

At the same time, Xiamen Rural Commercial Bank was also issued 10 fines, with a total fine of about 7.95 million, involving issues such as "illegal disposal of non-performing assets, misappropriation of credit funds for payment of land premium, illegal provision of guarantees or repurchase commitments", and the penalty dates are concentrated in 2020-2022.

Wang Xiaojian is a financial executive with a deep relationship with real estate. According to the data, Wang Xiaojian graduated from the real estate department of Hunan City University in 1994, majoring in real estate management, and later transferred to the department of finance and finance of Xiamen University to major in money and banking. Prior to joining Xiamen Rural Commercial Bank, he worked as a senior executive in Xiamen Xiangyu Group and Xiamen Financial Leasing.

During this period, Xiamen Rural Commercial Bank cooperated a lot with Fujian real estate enterprises. However, as the problem of highly leveraged real estate companies has become prominent, some problems have also surfaced.

For example, in October 2021, the dispute between Xiamen Rural Commercial Bank and Fusheng Real Estate was officially opened, and the two parties launched a lengthy lawsuit based on the "financial loan contract dispute" that had arisen before.

Xiamen International Bank, which Wang Xiaojian is now in charge of, also has deep relationships with real estate companies, especially those in Fujian.

In December last year, Xiamen International Bank signed a bank-enterprise strategic cooperation agreement with China Wuyi and CIFI Group, focusing on real estate development, international engineering general contracting, property services, cross-border e-commerce, etc.

In fact, Xiamen Rural Commercial Bank and Xiamen International Bank are important sources of capital for many enterprises in Fujian (especially Xiamen), including a large number of Fujian real estate enterprises.

According to the enterprise investigation, the main shareholders of Xiamen Rural Commercial Bank come from Xiamen Xiangyu, Xiamen International Trade and Xiamen C&D Group; The shareholders of Xiamen International Bank are also Xiamen International Trade and Xiamen C&D, as well as Suzhou New Technology and Gorgeous Family.

Banks and enterprises are always closely related, and when a company has a crisis, it may be the first to "get in" to the bank. Just like Tian Wenjun's "Deyu Department" was accused of taking illegal loans of more than 200 billion yuan from Shanxi Rural Commercial Bank and City Commercial Bank, and Ziguang Group was accused of illegally occupying 470 million yuan of state-owned assets...

When the real estate enters the adjustment cycle, it is also necessary for the bank to digest the risk, and the corresponding investigation and fines will naturally continue for a long time.