Changpeng Wan
Regulatory Hammer Falls on Jiangsu Zijin
The People’s Bank of China Jiangsu Branch has imposed a significant RMB 2.4 million fine against Jiangsu Zijin Rural Commercial Bank for systemic compliance failures. This enforcement action followed documented violations across seven distinct regulatory areas, signaling China’s intensified banking supervision posture amid growing financial sector scrutiny.
Key developments:
- RMB 2.4 million corporate penalty plus confiscation of RMB 20.22 illegal gains
- Personal fines against former executives Sha (沙某) and Yao (姚某)
- Detailed violation categories spanning account management to credit data governance
- Reinforcement of China’s financial integrity protection mechanisms
Anatomy of Regulatory Violations
The Jiangsu branch of China’s central bank identified seven compliance breaches warranting enforcement:
Financial Statistics Management Violations
Failure to maintain accurate reporting systems violates PBOC Directive No. 26. Zijin Bank allegedly submitted incomplete loan classification data from its SME portfolio, compromising systemic risk assessment capabilities.
Account Management Deficiencies
The institution failed to conduct proper due diligence during corporate account openings as mandated by Article 19 of China’s Banking Regulations. Cross-referencing with SAIC business registries revealed inconsistencies at 32 account openings during 2024-Q1.
Improper Merchant Management
Former electronic banking division head Sha (沙某) received personal liability for violations of Sections VII-IX of Payment Services Regulations. Oversight failures enabled improper relationships with third-party payment processors lacking sufficient merchant vetting mechanisms.
Payment Terminal Control Failures
Internal audits confirmed non-compliance with PBOC’s Terminal Security Technical Specifications. Violations included unregistered POS devices and inadequate encryption protocols across rural branch networks.
The Human Cost of Non-Compliance
Executive Accountability Measures
Personal liability extends beyond institutional penalties:
- Sha Mou (沙某): Former e-banking director fined RMB 50,000 for merchant management violations
- Yao Mou (姚某): Inclusive finance chief fined RMB 100,000 for improper credit data handling
Strategic Leadership Failure
The enforcement action reveals deeper governance problems according to regulatory compliance expert Lee Zhang: “When multiple departments demonstrate systemic non-compliance, root causes typically trace to board-level supervision deficits and inadequate compliance resource allocation.”
China’s Evolving Regulatory Landscape
Recent enforcement trends reflect China’s Financial Stability Law emphasis:
- Total banking fines increased 37% year-on-year according to National Financial Regulatory Administration data
- Rural commercial banks represent over 60% of penalty recipients given resource constraints
- New blockchain verification requirements emerge for credit data sharing protocols
Comparative Enforcement Approaches
International counterparts exhibit similar rigor. The UK Financial Conduct Authority imposed £76 million in banking fines during 2024-Q2 as highlighted in the Financial Times banking compliance benchmark analysis.
The Rural Banking Challenge
Zijin’s infractions spotlight structural challenges facing China’s 1,542 rural commercial banks:
Resource Constraints
A 2024 China Banking Association report confirms rural institutions allocate just 0.3% of operating expenses to compliance versus 1.2% at national banks
Digital Transformation Lag
Automated compliance systems coverage:
- National banks: 89% adoption rate
- Provincial commercial banks: 67%
- Rural institutions: 24%
Blueprint for Banking Compliance Reform
Three-Pillar Framework
The National Financial Regulatory Administration recommends:
- Technology deployment: AI transaction monitoring systems
- Talent development: Certification requirements for risk officers
- Governance reconstitution: Direct board-level compliance committees
Implementation Roadmap
Staged execution delivers optimal outcomes:
Phase 1: Vulnerability assessment completed within 90 days
Phase 2: Core systems upgrade
Phase 3: Independent verification testing
Advancing Banking Integrity Nationwide
The Zijin enforcement underscores China’s commitment to financial system integrity. Responsible institutions move beyond technical compliance toward embedding regulatory consciousness within organizational culture. With rural banking deposits exceeding ¥46 trillion according to PBOC June reports, compliance transformation delivers stability dividends that ultimately safeguard depositors and maintain credit flow to underserved regions.
Financial executives should immediately reassess control frameworks using NFRA’s Compliance Maturity Index and consider engagements with our Banking Practice Advisory consortium for gap analysis diagnostics.
