An article by the Chinese central bank explains how Tomorrow Group, owned by disgraced tycoon Xiao Jianhua, caused the fall of Baoshang Bank through illegal loans, reduced risk control and bad culture.
Tomorrow Group illegally borrowed 156 billion yuan (US$22.3 billion) from the government-controlled Baoshang Bank, said an article in a publication backed by the central bank and authored by the bank's takeover team head Zhou Xuedong.
347 loans were issued through to 209 shell companies from 2005 to 2019 which eventually became non-performing assets, the article added.
Suggestions for improving corporate governance and transparency include diversified shareholding structures, strengthened external supervision and better information disclosures.
Not One Person
Tomorrow Group and Baoshang Bank were both owned by billionaire tycoon Xiao Jianhua who was reportedly abducted in 2017 from a hotel in Hong Kong to mainland China where he is now awaiting trial on charges of bribery and stock market manipulation. Although the central bank article claimed that Xiao had interfered in Baoshang Bank’s daily operations and risk controls, it noted that the lender’s fall was not the doing of one man.
«Baoshang Bank’s downfall was not because of one person and did not come overnight,» the article said. «On top of the failure on business and corporate governance, bad corporate culture was an important reason as well.»
In addition to Baoshang, regulators also took over Hengfeng Bank and Jinzhou Bank last year, both of which were also previously controlled by Tomorrow Group founder Xiao.
