A century-old Chinese bank became the latest target of a tightening financial clean-up in the world's second largest economy.
China's banking regulator has fined Postal Savings Bank of China (PSBC), along with 11 other related banks, a total of 295 million yuan (about 46 million U.S. dollars) over a bill fraud case in the northwestern province of Gansu.
Probes into a PSBC sub-branch in Wuwei City in December found 7.9 billion yuan worth of bills were involved and another 3 billion yuan of wealth management funds were illegally drawn or embezzled, according to the China Banking Regulatory Commission (CBRC).
It was the third major penalty on domestic lenders since December, following a 462-million-yuan fine imposed on a branch of Shanghai Pudong Development Bank for illegally covering up bad loans and a 722-million-yuan fine for China Guangfa Bank for offering illegal guarantees for defaulted corporate bonds.
The hard action suggests an even tougher stance on risk control by the government, which has already taken a hardline on financial violations and accumulating risk for the past year.
The CBRC listed 10 regulatory tasks for 2018, ranging from shrinking corporate debts to cracking down on illegal activities to curbing property bubbles.
While risks are generally manageable, non-performing assets, imperfect internal control, shadow banking and other hidden dangers still pose threats to financial stability, CBRC chairman Guo Shuqing has said, warning of hidden dangers of "gray rhinos" and "black swans."
Two other main financial regulators also moved swiftly in stepping up supervision in the mean time.
The China Securities Regulatory Commission has started to take rigorous approval procedures for initial public offerings (IPOs) since a new public offering review committee came into office in October, rejecting or suspending more than half of IPO applications. During the previous week, only three of 18 businesses were given the greenlight.
Over the past three years, the approval rate stood above 90 percent, according to Wind Info, a financial information service provider.
The insurance regulator rolled out new rules to toughen regulation over insurance funds, with the aim of directing more capital into the real economy. Outbound investment of insurance funds will be under scrutiny, and shareholders of insurance firms will be banned from interfering in the operation.
Prevention of financial risks is key for China to win what policy makers called the three tough battles, during the tone-setting Central Economic Work Conference in December, namely controlling risks, reducing poverty and tackling pollution.
Liu He, a member of the Political Bureau of the Communist Party of China Central Committee, stressed financial risk control in his speech at the World Economic Forum in Switzerland.
"Shadow banking and hidden debt for local governments are serious problems we have to deal with," he said. "In about three years, we will strive to bring the overall leverage ratio under effective control, make the financial system more adaptable and better serve the real economy, prevent systemic risks and facilitate better flow of economic activities."
Thanks to the efforts, progress has been made. The country's overall leverage ratio growth has slowed down, and outstanding loans from shadow banking have begun to decline.
Robin Xing, chief China economist with Morgan Stanley, said the situation was improving and risks would remain under control.
"Policy tightening and related financial sector clean-up policies have helped to control financial risks," he said.
Xing estimated that China's debt to GDP ratio would peak in the second half of 2019.