The Chinese authorities arrested several officials and financiers on charges of fraud scheme that cost the largest creditor of the Chinese business, the Industrial & Commercial Bank of China, $900 million.

Businessman Fan Minchan was using forged documents to obtain loans in one of the
ICBC’s branches. The Chinese national newspaper, China Daily, says the businessman received 7.4 billion yuan ($894 million), out of which 2 billion yuan ($241million) had disappeared. The money is assumed to have left the country. A few dozen bank employees and state officials are charged with getting bribes from Fan.
Xinhua reports that up to 69 people can be charged in the trial, while the scheme involved 80 bankers and officials.

The scandal comes at an unfortunate time for the ICBC right before the government fulfiled its intention to invest billions of dollars in the bank to improve its financials before listing its shares abroad. The affair once again reminded of the risks state companies face in remote regions where managers have decade-long ties with local officials.

The four largest Chinese banks are still plagued by inadequacies of internal controls as many department heads are more prone to obey the local authorities than the bank management.

The Bank of China and China Construction Bank, two of the top four, are now looking for strategic investors, getting ready to list their stock abroad. The government helped the two entities to get rid of a part of non-performing loans by investing $45 billion. ICBC was to be the next in line for foreign listing.