NAFMII Penalises Bank of Beijing with Underwriting Suspension

Source: Regulation Asia Editors, Regulation Asia 2020-07-21

NAFMII says Bank of Beijing failed to perform due diligence and adequately monitor five bond issuances for Kangde Xin Composite Material Group, all of which defaulted in recent years.

NAFMII (National Association of Financial Market Institutional Investors) has ordered Bank of Beijing to suspend its bond underwriting business for six months as a penalty for helping a chronic defaulter sell short-term notes.

According to Caixin, NAFMII accused Bank of Beijing of failing to perform due diligence and to adequately monitor its bond issuances.

The penalty is being imposed one year after Shenzhen-listed Kangde Xin Composite Material Group, a supplier of German automaker BMW, was banned from bond sales after a series of defaults since late 2018.

Kangde Xin has been placed under investigation in relation to the defaults and related allegations of financial reporting fraud.

Since 2015, Bank of Beijing was the main underwriter of five bond issuances by Kangde Xin, raising a total CNY 4.1 billion (USD 586 million) for the company through issuing bonds, all of which defaulted.

Last year, the CSRC (China Securities Regulatory Commission) said it found that Kangde Xin inflated its profits from 2015 to 2018 through fictitious sales and inflated operating costs and expenses.

The parent company, Kangde Group, was said to have embezzled as much as CNY 53.1 billion of Kangde Xin’s funds from 2014 to 2018 through its accounts at Bank of Beijing.

In April this year, the Beijing branch of the CBIRC (China Banking and Insurance Regulatory Commission) asked Bank of Beijing’s Xidan branch to rectify wrongdoings in its cash management after the bank admitted that Kangde Xin’s account balance zero, rather than the CNY 12.2 billion recorded in the company’s financial statements.

Multiple lawsuits have been filed by creditors seeking to recover their losses.

NAFMII

Bank of Beijing

NAFMII Penalises Bank of Beijing with Underwriting Suspension

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