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No. 22 of 2016 (General Serial No. 253): The Audit Results of the Assets, Liabilities, Profits and Losses of Agricultural Bank of China Co., Ltd. for
2017-06-08日   Soure : 【来源:International Cooperation Department】 :

No. 22 of 2016 (General Serial No. 253):

The Audit Results of the Assets, Liabilities, Profits and Losses of Agricultural Bank of China Co., Ltd. for the Year 2014

In accordance with the stipulations of the Audit Law of the People’s Republic of China, in 2015 the National Audit Office (CNAO) conducted audit on the assets, liabilities, profits and losses of Agricultural Bank of China Co., Ltd. of the year 2014, with the extension and tracing back to relevant items. The audit focused on the head office of Agricultural Bank of China and its 7 subsidiary banks in Shanghai, Zhejiang, Jiangsu, Guangdong, Shandong, Sichuan, Hong Kong, and Agricultural Bank of China Financial Leasing Co., Ltd. (hereinafter referred to as Agricultural Bank Leasing) etc..

I. Overview

Agricultural Bank of China was listed in July 2010 in Shanghai and Hong Kong. As reflected in the consolidated financial statement, by the end of 2014, its total assets amounted to RMB15,974.152 billion, the total liabilities reached RMB14,941.533 billion, and there was RMB1,032.619 billion worth of owners’ equity. The realized operating revenue of the same year was RMB520.858 billion and a net profit of RMB179.51 was earned.

The audit results indicated that Agricultural Bank of China implemented the national financial policies, carried on the improvement of the developing strategy of “facing agriculture, rural areas and farmers, combining urban and rural areas, integrating into international community and providing diversified services”, and continuously elevated the operation and management levels. However, some weak links still existed in fields such as financial revenue and expenditure, making and implementing important decisions, business operation, risk management and control, and professional ethics.

II. Major Problems Found in the Audit

(I) Financial revenue and expenditure

u From 2012 to 2014, the head office of Agricultural Bank of China and its 6 subsidiary banks had made RMB555 million of extra disbursement of food allowance and clothing allowance through items such as “employee welfare expenses” and “labor protection expenses”, among which the amount of 2014 was RMB200 million. The head office of Agricultural Bank of China also had paid an extra RMB158 million of housing fund for employees in excess of the standards of Ministry of Finance, among which the amount of 2014 was RMB60.4347 million.

u In 2014, the Sichuan Subsidiary Bank did not claim compensation from guarantor and transferred RMB365 million of poorly performing assets. The Zhejiang Subsidiary Bank and Guangdong Subsidiary Bank transferred RMB3.204 billion of poorly performing assets at a price under the valuation of the collateral.

u From 2013 to 2014, some false loss and profit problems such as understating income and overstating expenditures had existed in 4 subsidiary banks in Zhejiang, Shandong, Jiangsu and Shanghai, involving RMB23.5767 million, among which the amount of 2014 was RMB22.5488 million. 3 subsidiary banks in Shandong, Zhejiang and Jiangsu had had problems such as inaccurate accounting, involving RMB169 million, among which the amount of 2014 was RMB114 million.

u There were 109 houses in head office of Agricultural Bank of China that had remained idled from 2010 to 2014 and 131 real estates in Jiangsu Subsidiary Bank had been idled or partly idled by the end of May 2015. Since July 2012, the Guangzhou Beixiu Branch of Guangdong Subsidiary Bank had rented a business building, which had been idled by August 2014 because it could not be renovated. Agricultural Bank Finance Co., Ltd. was canceled in 2013 as planned, resulting in HKD67.995 million of savings being idled for nearly 2 years.

(II) Decision- making and implementation

In 2014, Agricultural Bank of China added RMB8 billion of investment to Agricultural Bank Leasing and RMB3.57 billion to Agricultural Bank Life Insurance Co., Ltd. Respectively (hereinafter referred as Agricultural Bank Life Insurance) without the approval of the board of directors. Agricultural Bank Life Insurance paid RMB999 million of added investment in advance without being approved by the shareholder’s conference. From 2002 to 2004, the board of directors of Agricultural Bank Life Insurance had only 9 or 10 members, lesser than 11 as required in regulations of the corporation.

(III) Business Operation

uFrom 2012 to 2014, the growth rate of agriculture-related loans of Agricultural Bank of China had slowed down, the average growth range in 3 years was 12.43%, 4.92% lower than other companies in the same industry. Besides, Agricultural Bank of China had failed to strictly implement the statistical system of agriculture-related loans, counting RMB36.714 billion of other loans as agriculture-related loans. The agriculture-related contracts leasing capital of Agricultural Bank Leasing only made up 8.46% of its leasing business, failing to demonstrate the special feature of serving “agriculture, rural place and farmers”. Besides, the spot check showed some rises of agriculture-related loan interest at some branches.

u Some of the electronic equipment of the “Jinsui Farmer-Benefiting Card” project are idled. Among the 15746 sets of equipment installed before and in 2014 by Zhejiang Subsidiary Bank, 4215 sets have had no trading records since 2015. From 2012 to 2014, there had been 4.9142 million farmer-benefiting cards released by 6 subsidiary banks in Beijing, while 3.455 million of cards had seen no record of transaction or were canceled by the end of 2014.

u From 2012 to 2014, in order to avoid credit scale management, the head office and some subsidiary banks, through buying usufruct of the trust plans of the overseas subsidiary bank Agricultural Bank International Holding Co., Ltd., had financed RMB142.03 billion to domestic companies (the amount of 2014 was RMB54.06 billion), some of which were invested to restrictive industries and fields. In 2014, after MIIT published the names of the obsolete companies and those of overcapacity, Agricultural Bank of China still offered RMB3.535 billion of loans to 33 of them. From 2012 to 2014, through directional financing methods, Jiangsu Subsidiary Bank offered RMB8.755 billion through directional financing to some companies of restrictive industries including thermal power industry and paper-making industry etc..

u From 2012 to 2014, the numbers of corporate loans individually granted credit under RMB5 million by Agricultural Bank of China decreased by 2.76%, 10.27% and 3.2% respectively. 6 subsidiary banks including the Zhejiang subsidiary had failed to strictly implement the state classifying standards of small and micro enterprises, counting loans to other enterprises as those to small and micro enterprises, which involved RMB5.52 billion.

uFrom 2012 to 2014, Agricultural Bank Leasing, without actually providing the consultation services, had charged and received RMB1.301 billion of consultation fees to customers, among which the amount of 2014 was RMB223 million.

u From 2010 to 2014, 6 subsidiary banks in Shandong, Jiangsu, Zhejiang, Guangdong, Sichuan and Shanghai had irregularly made RMB18.232 billion of credit business such as offering loans to or accepting bill of exchange of unqualified companies who had provided false materials or had false trading backgrounds.

uFrom 2012 to 2014, 4 subsidiary banks in Beijing, Shandong, Zhejiang and Sichuan had sold financing products on a commission basis without approval, conducted foreign exchange swap and other intermediary businesses for companies who had no need for international settlements, involving RMB11.066 billion, among which the amount of 2014 was RMB7.244 billion.

u From 2012 to 2014, 29 subsidiary banks including Yunnan Subsidiary Bank, without approval, had irregularly made guarantee and repurchase promises, which were tantamount to “drawer agreements”, for customer financing, involving RMB25.174 billion (the amount of 2014 was RMB7.079 billion), of which RMB850 million belonged to money paid in advance.

u In 2014, 2 subsidiary banks in Zhejiang and Jiangsu, through accounting interbank deposits as normal public funds and some other methods, irregularly made a deposit business of RMB1.935 billion.

u In December 2011, despite lack of leased property and incomplete procedures, Agricultural Bank Leasing irregularly made a RMB550 million after-sales lease-back business of real estate.

(IV)Risk Management and Internal Control

uFrom 2011 to 2014, six subsidiary banks including the Sichuan Branch had failed to strictly check the companies before offering loans to them, resulting in some companies receiving loans from Agricultural Bank of China through falsifying financial statements and purchasing and selling contracts. Seven subsidiary banks including the Guangdong Branch had failed to strictly implement the post-loaning inspection system, causing some companies fail to use the loans in accordance with the regulations. The problems above involved RMB18.738 billion, among which the amount of 2014 was RMB6.148 billion.

u From 2012 to 2014, the head office of Agricultural Bank of China and the Shanghai Subsidiary Bank had adopted some non-bidding methods such as competitive negotiations to purchase items in some mass procurement programs without reporting and recording in accordance with the regulations, involving RMB16.983 billion, among which the amount of 2014 was RMB4.271 billion. The head office of Agricultural Bank of China and the Shanghai Subsidiary Bank had spent RMB1.681 billion on purchases from unqualified companies with false credentials. Besides, the mass purchasing review committee of Agricultural Bank made up by internal and external experts had failed to perform its responsibilities in accordance with the regulations.

uBy the end of 2014, the head office of the Agricultural Bank of China had failed to enact relevant system of travel expense management. From 2013 to 2014, 167 of the 249 abroad-going groups of the head office of Agricultural Bank of China had not been part of the plan of going abroad on public funds made at the beginning of the years. Besides, following problems still exists: the information system lacked necessary data control functions; The Annuities Council of Agricultural Bank of China redeemed the financing products in advance in violation of the contract; and some subsidiary banks broke the regulation of the bank and transferred money on behalf of customers.

(V) Professional Ethics

uFrom 2013 to 2014, Sichuan Subsidiary Bank had rent 119.25 square meters of the resting room of the first-class cabin of Chengdu Shuangliu Airport, which were actually used for 8174 person-time (staffs included). The rent was RMB7.4884 million, of which the amount of 2014 was RMB2.7477 million.

u From 2013 to 2014, some branch organizations of Shandong Subsidiary Bank had disbursed RMB3.9798 million to purchase cigarettes and so on in the name of meeting expenditures and training expenditures etc., among which the amount of 2014 was RMB2.1729 million.

III. Audit Disposal and Rectification

Regarding issues discovered through auditing, the CNAO has issued audit report and released letters of audit decisions. Agricultural Bank of China are organizing the rectification at present, having made and improved 35 relevant regulations (6 of which were for the head office), and relevant persons in charge have been dealt with.

Clues related to issues in violation of laws and disciplines discovered through the audit have been legally transferred to departments concerned for further investigation.