A former president of Bank Of Nanjing Co.,Ltd., once known as a "bond market pioneer," has been sentenced to five and a half years in prison for a major embezzlement case that remained concealed for over a decade. Recent judicial publications have provided the first complete disclosure of this elaborately planned scheme.
In 2009, while serving as a vice president, the individual exploited his position to improperly use 480 million yuan from the bank's reserve funds. The funds were used for the early redemption of a wealth management product, which was then replaced by a newly issued product. The purpose was personal gain; the executive invested 7.5 million yuan in the product and profited 15.75 million yuan, achieving a 210% return over 14 months.
The case reveals how senior financial executives can exploit regulatory loopholes to create highly profitable opportunities for insiders. It also highlights significant deficiencies in the bank's internal control systems and checks and balances. In the years following the executive's imprisonment, these internal control weaknesses were not fully remedied, with problems continuing to emerge, particularly in credit operations.
The scheme dates back to a credit asset securitization product named "KY01," issued in 2006 with a total scale of approximately 50 billion yuan. The bond was divided into three tranches. Tranches A and B were publicly offered with low risk and priority payment, while Tranche C was a "subordinated tranche" privately placed to specific investors, offering higher potential returns but bearing greater risk.
Underwriters from company J saw an opportunity. Judging the underlying assets to be high-quality, they sought a financial partner to facilitate the deal and targeted the then-prominent Bank Of Nanjing Co.,Ltd.. They proposed a "win-win" scheme to the bank's vice president and another senior manager: the bank would issue a structured wealth management product specifically to raise funds for purchasing the bond's Tranche C.
In June 2008, Bank Of Nanjing Co.,Ltd. launched the "Jufu No.1" wealth management product, raising 425 million yuan. It featured a two-tier structure: a "stable tier" of 365 million yuan offered to the public with a promised annualized return of 9%, and an "aggressive tier" of only 60 million yuan reserved for insiders, including the vice president and the underwriters. This structure ensured that the aggressive tier would capture most of the excess profits after covering the stable tier's fixed returns. A "early termination clause" was inserted into the product agreement, allowing termination once the stable tier achieved its 9% return.
After six months of operation, market interest rates began to fall. The planners realized that terminating the old product and issuing a new one with a lower return for the stable tier would significantly boost profits for the aggressive tier. The core challenge was sourcing over 400 million yuan to redeem "Jufu No.1" without alerting public investors or exposing the insider holdings.
Failing to find external bridge financing, the group turned to the bank's own reserve funds. These funds are reserves for ensuring deposit payments and liquidity, requiring legitimate business needs for use. The executives fabricated a narrative, claiming that macroeconomic recovery was increasing corporate default rates and that the underlying "KY01" assets were deteriorating rapidly, posing significant risk. They proposed using reserve funds for early redemption under the guise of "risk prevention."
This proposal was opposed by several departments, including personal banking and risk control, which found the risk description baseless and warned it could provoke investor skepticism. Nevertheless, the plan was forcefully approved at a president's office meeting chaired by the vice president.
In July 2009, over 480 million yuan from the bank's reserves was used to prematurely redeem "Jufu No.1," paying the stable tier a 9% return and the aggressive tier a 33.89% return. A new product was immediately issued to raise 490 million yuan, completing the fund transfer. The new product's stable tier return was slashed to 4%, shifting more profit to the aggressive tier. The number of aggressive tier subscribers was reduced from over 70 to just 21, narrowing the beneficiary circle further.
The scheme went undetected for a decade until it came to light in 2019. Investigations began that year, leading to the executive's resignation in May. By November, he had stepped down from all posts. The Supreme People's Court recently disclosed the case details. The executive personally invested 7.5 million yuan and profited 15.75 million yuan, a 210% return. Other insider subscribers also received substantial returns, while the bank, bearing the risk, earned only a few million yuan in fees.
The court found the executive guilty of embezzlement as a state functionary, exploiting his position for personal profit. As a principal offender, he was sentenced to five years and six months imprisonment. An accomplice received a lighter sentence. Appeals were rejected, upholding the original verdict. The executive has likely completed his sentence based on the timeline.
Analysts note that while bank employees can purchase their bank's wealth management products, they must adhere to the same terms as ordinary customers without special privileges. They are prohibited from using non-public information for personal gain. Banks are required to establish robust internal management and accountability mechanisms.
This case exposed multiple vulnerabilities at Bank Of Nanjing Co.,Ltd. regarding product structuring, tiered design, and internal controls. It serves as a stark warning to the financial industry: without robust constraints and transparent oversight, deep entanglements of power and interest can breach compliance boundaries.
Following the executive's investigation, the bank was fined for numerous violations at the end of 2019, with several related to wealth management业务, including inter-product profit adjustment and inadequate segregation of managed and proprietary funds. While industry-wide regulations have since reduced such irregularities, the bank has continued to face significant penalties, particularly in credit operations.
Recent high-value penalties have been concentrated in the credit sector. Since 2025, the bank and related personnel have accumulated fines totaling 7.63 million yuan, mostly for credit业务 violations, concerning issues like inadequate pre-lending, lending, and post-lending reviews.
According to the bank's performance forecasts for 2025, it shows strong growth momentum, with total assets exceeding 3 trillion yuan. Operating income and net profit attributable to shareholders were 55.54 billion yuan and 21.807 billion yuan, increasing by 10.48% and 8.08% year-on-year, respectively. Net interest income grew 31.08% to 34.902 billion yuan, being the primary growth driver.
Despite a weaker demand for loans overall, the bank's loan scale increased by 13.37%, far exceeding the industry average. This rapid credit expansion has coincided with frequent违规行为, suggesting a potential prioritization of scale over quality. The密集的罚单 indicate execution gaps throughout the credit process.
Although the non-performing loan ratio remains low at 0.83%, pressure on personal loan quality is evident, with NPL ratios for residential mortgages, consumer loans, and business loans all rising in the first half of 2025.
From executive corruption to credit违规行为, the challenges facing Bank Of Nanjing Co.,Ltd. extend beyond operational risk control to systemic corporate governance issues. If internal control reforms lag behind scale expansion, potential risks may continue to accumulate, posing future downward pressure on asset quality. As this case警示s, the greatest risk for a bank may not originate from the market but from internal control failures.
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