Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

Bank of China in New Fraud Scandal

New York -- Bank of China, the nation's second-biggest lender, said a Beijing loan manager was arrested in connection with a 640 million yuan ($77 million) property loan fraud, the latest in a series of scandals pointing to lax controls in the financial services industry.

Beijing Huayunda Real Estate Development borrowed money from the Beijing branch between 2000 and 2002 for its Senhao Apartment project using falsified documents, Bank of China spokesman Wang Zhaowen said by telephone today in Beijing. The bank fired loan manager Xu Weilian, who was suspected of conspiracy with outside parties, Wang said. Xu was later arrested, he said, without giving further details.

The latest scandal comes as China's biggest four state banks are preparing to go public and need to convince investors that bad loans and poor management are in the past. Bank of China, China Construction Bank and Agricultural Bank, three of the big four, have been implicated the past two weeks in fraud cases involving over $28 million, according to Xinhua News Agency and the China Banking Regulatory Commission.

"They have to clean up for sure to convince investors that they are now different, with shareholders' interests in mind," said Arthur Lau, a banking analyst with Barclays Bank in Singapore.

China ordered banks on March 28 to identify which managers are responsible for what departments and to make more timely announcements of financial irregularities in an attempt to tighten surveillance.

The scandals will not delay the government's plan to sell shares in the banks, central bank Governor Zhou Xiaochuan said a day later.

Investigations by Beijing police have continued since Bank of China first reported the real estate fraud case in September 2002, Wang said, confirming the first disclosure of the case by Xinhua Sunday.