Regulatory penalties against financial institutions decreased in May, with a total of 690 fines issued, marking a month-over-month decline of 17.27%. The total amount of fines and confiscations reached 127 million yuan, a decrease of 55.44% from the previous month.
In May, several financial institutions were penalized for implementing improper performance assessment systems. Among them, Fujian Shaxian Rural Commercial Bank and Datian County Rural Credit Cooperative were fined for setting or mandating improper assessment targets. China International Capital Corporation Wealth Management Limited (CICC Wealth) was involved in violations related to performance assessments for fund sales.
Furthermore, penalties related to asset quality classification saw a significant increase of 135.29% compared to the previous month, a figure notably higher than in preceding months. Banks such as China Minsheng Bank, Quanzhou Bank, and Jiangxi Duchang Rural Commercial Bank received a relatively high number of related penalties, including those issued to employees.
Penalty Overview by Institution Type in May
The National Financial Regulatory Administration issued 571 fines, totaling 91.19 million yuan in penalties and confiscations. The number of fines issued by the People's Bank of China and the China Securities Regulatory Commission also decreased month-over-month. The PBOC issued 53 fines, down 55.46%, while the CSRC issued 54 fines, a decrease of 29%. The number of fines from the State Administration of Foreign Exchange saw a slight increase.
Analyzing penalties by institution type, banks received 346 fines, a decrease of 26.22%, with total penalties and confiscations amounting to 102 million yuan, down 50.24%. The insurance sector saw a slight increase in the number of fines, receiving 288 in May, up 10.77%. Penalties for securities firms, futures companies, and private funds decreased month-over-month.
Notable Compliance Cases in May
Multiple Institutions Penalized for Improper Performance Metrics
In May, several financial institutions faced penalties for improper performance assessment systems. Fujian Shaxian Rural Commercial Bank and Datian County Rural Credit Cooperative were penalized for violations including setting improper deposit assessment targets. A major state-owned bank was also fined for improperly setting assessment indicators, though the specific business involved was not detailed in the announcement.
CICC Wealth was involved in violations concerning performance assessments for fund sales. Its Changchun Dajie Securities Business Department was found to have improper incentive structures, using fund sales revenue as a primary performance metric and directly linking employee assessments to the number of new accounts opened and client trading volume.
The financial penalties for these violations were substantial. Fujian Shaxian Rural Commercial Bank was fined 1.7 million yuan for violations including setting improper deposit assessment targets and inadequate management of individual business loans. Fujian Datian County Rural Credit Cooperative was fined 1.45 million yuan for similar issues with deposit assessment targets.
The 2012 "Regulatory Guidelines on Performance Evaluation for Banking Financial Institutions" explicitly prohibits setting point-in-time scale assessment indicators and establishing separate or temporary assessment targets outside the comprehensive performance evaluation system. However, in practice, some banks still exert pressure on branch levels through disguised assessment methods.
Cross-Border Securities Violations Become a Key Enforcement Focus
In May, penalties imposed by the CSRC on several cross-border securities institutions, including Futu, Longbridge, and Tiger Brokers, drew significant market attention. These institutions, without obtaining the necessary licenses for securities brokerage or securities margin financing businesses, conducted marketing, promotion, and trade execution services for securities transactions within China and derived related income, constituting illegal securities business operations.
Additionally, relevant domestic and overseas entities of these three institutions violated provisions of the Securities Investment Fund Law and the Futures and Derivatives Law, constituting illegal public fund sales and illegal futures brokerage activities.
According to disclosures by Futu and Tiger Brokers, the total proposed penalties for the two companies exceed 2.2 billion yuan. Specifically, Futu faces a proposed penalty of 1.85 billion yuan, while Tiger Brokers faces 411.2 million yuan.
This concentrated enforcement action sends a clear signal: conducting securities business within China without proper authorization, regardless of where the entity is based, will face severe penalties. This case serves as a significant warning for compliance building within cross-border financial service institutions.
Key Compliance Trends in May
Penalties Related to Asset Quality Classification More Than Double
The accuracy of asset quality classification is receiving increasing regulatory scrutiny. Based on incomplete statistics, there were 40 fines in May related to inaccurate or poorly managed asset quality classification, a figure significantly higher than the fewer than 20 seen in previous months.
Banks including China Minsheng Bank, Quanzhou Bank, Jiangxi Duchang Rural Commercial Bank, Jiangxi Ningdu Rural Commercial Bank, and Anhui Tongcheng Rural Commercial Bank received a relatively high number of related penalties, including those for employees.
Specific violations involved inaccurate risk classification of loans/credit assets, inadequate management of credit asset risk classification, and non-compliant loan risk classification and disposal. Some banks were found to have inaccurate five-category loan classification alongside violations such as using new loans to repay old ones to conceal non-performing assets. Previously, banks have been penalized for using inaccurate loan classification to mask bad loans.
Penalties for Unauthorized Cross-Region Operations Surge 138.46%, Targeting Insurers and Village Banks
In May, several more financial institutions were penalized for cross-region operations. Based on incomplete statistics, there were 31 fines in May related to cross-region business or operating outside licensed areas, a surge of 138.46% month-over-month. The penalized entities were mostly insurance companies, along with two village banks.
Among them, PICC Property and Casualty Company Limited Nantong Branch, Bohai Property Insurance Yichun Central Sub-branch Gao'an Marketing Service Department, and China Pacific Property Insurance Wuhan Central Sub-branch were penalized for conducting insurance business across regions. Tianan Property Insurance Chongqing Branch was fined for improperly underwriting employer's liability insurance for out-of-region entities.
The two village banks, Shanghai Chongming Shanghai Rural Commercial Bank Village Bank and Jiangmen Kaiping Changjiang Village Bank, were penalized for issuing cross-region loans or loans to out-of-area borrowers.
Financial Institution Penalty Rankings
In May, several major state-owned banks and joint-stock banks ranked high in total penalties and confiscations. The joint-stock banks included China Minsheng Bank, China Bohai Bank Co., Ltd. (CBHB), and Huaxia Bank. Two rural commercial banks also entered the top ten: Zhejiang Fuyang Rural Commercial Bank with 4.7 million yuan in penalties and confiscations, and Ningbo Fenghua Rural Commercial Bank with 3.4017 million yuan.
Among non-bank financial institutions, PICC Property and Casualty Company Limited faced the highest total penalties and confiscations at 2.17 million yuan, followed by Tianan Property Insurance at 2.02 million yuan, and Sunshine Property and Casualty Insurance at 1.97 million yuan.
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