Bank of China's former chairman and president, Wang Xuebing, is serving a
12-year prison term for taking bribes. Liu Jinbao, a former president of the
bank's Hong Kong branch, was given a suspended death sentence last August for
embezzlement ¡ª such sentences are usually commuted to life in prison.
Two former branch managers and their family members are facing trial in Las
Vegas, Nev., for alleged embezzlement and money laundering.
The bank, and China's banking regulators, have vowed to improve risk controls
and management to prevent further scandals.
Improvements brought about by the government's bailout are "offset by
undertested risk management systems, modest profitability and capitalization and
the bank's mediocre control over its branches," ratings agency Standard &
Poor's said in a recent report.
As part of its effort to bring in outside expertise and reassure investors,
Bank of China has sold stakes worth a total of $5.1 billion to UBS, Singapore's
Temasek Holdings and a consortium led by the Royal Bank of Scotland Group PLC.
It also recruited a veteran banker in March 2005 from London-based HSBC
Corp., Lonnie Dounn, to serve as its credit officer ¡ª a pioneering move for a
state financial institution but one that appears to have faltered.
The Beijing-based bank announced in its IPO prospectus that Dounn has
resigned and is due to leave in September. It did not say why he was leaving or
who would replace him.
While allowing the banks to sell billions of dollars worth of equity to
foreign banks and other institutional investors, Beijing has stressed its
determination to maintain state control over the strategically important
industry, limiting the foreigners' say in management.
Bank of China is selling only 10.5 percent of its equity, and even if it
exercises an option to sell another 3.84 billion shares, raising the IPO's
proceeds to $11.2 billion, it will be listing only 11.9 percent of its total
capital.
