In the first quarter of this year, both the number and the amount of bank penalties decreased compared to the previous quarter, with credit violations becoming the "hardest-hit" area.

Since 2026, the banking industry has continued to maintain a strong regulatory posture, and regulatory authorities have taken a “zero tolerance” attitude toward violations and irregularities committed by banks and their relevant responsible parties.

According to the corporate early warning dashboard, in this year’s first quarter, the People’s Bank of China, the National Financial Regulatory Administration, the State Administration of Foreign Exchange, and their dispatched agencies issued a total of 1,701 administrative penalties against banking institutions and practitioners, accounting for a 15.88% decrease from the previous quarter. Of these, there were 684 penalties imposed on institutions and 1,017 on individuals. The total amount of fines and confiscations was RMB 611 million, down 38.16% from the previous quarter, including RMB 595 million for institutions and RMB 16 million for individuals. Affected banks numbered 328, up 7 from the previous quarter.

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A reporter from The Daily Economic News (hereinafter referred to as the reporter) noted that in this year’s first quarter, bank noncompliance mainly focused on lending business. Wang Pengbo, Chief Analyst at BoCom Consulting, told the reporter that current noncompliance in lending business shows relatively clear characteristics, and that multiple factors combined have made lending-related violations particularly prominent.

Violations are mainly in the lending business

In terms of penalties, regulatory authorities have always strictly implemented the “dual-penalty system,” and in accordance with the law pursued responsibility of the relevant institutions and individuals. Penalty types include fines, warnings, and prohibitions on engaging in relevant professions or work. For penalties against institutions, fines are the most common type; for penalties against individuals, warnings are the most common type.

The reporter, after sorting through the cases, found that in this year’s first quarter, the number of large penalties above RMB 1 million decreased. According to corporate early warning dashboard data, in the first quarter, the relevant regulatory authorities cumulatively issued 127 large penalties above RMB 1 million, down 27 from the previous quarter, and the amounts of fines and confiscations for large penalties also saw a substantial decrease compared with the previous quarter.

Among them, China Construction Bank received the highest fined and confiscated amount, reaching RMB 43.5061 million. Next were Pudong Development Bank and Hangzhou United Rural Commercial Bank.

Overall, in this year’s first quarter, the areas of bank noncompliance mainly focused on lending business. Corporate early warning dashboard data show that in the first quarter, regulatory authorities issued 1,043 penalties for violations in lending business, down from 1,127 in the previous quarter.

Among them, lending business violations mainly concentrated on issues such as failure to duly perform the “three checks” on loans, improper handling and disbursement of loans, inaccurate classification of credit assets, and so on.

The reporter also noticed that inadequate internal control systems are another major reason banks are penalized, specifically including violations of regulations on credit reporting business management, violations of prudent operation rules, violations in charging fees, and charging/price mismatch, among others. Corporate early warning dashboard data show that in this year’s first quarter, regulatory authorities issued 414 penalties due to inadequate internal control systems, down 8% from the previous quarter.

Bank internal risk-control execution falls short

What are the main characteristics of current lending-business noncompliance by banking institutions?

“Currently, noncompliance in lending business mainly shows several characteristics: first, violations are still highly concentrated in the ‘three checks’ on loans. Pre-loan investigations are not performed with due diligence, mid-loan reviews are little more than formalities, and post-loan management is not properly carried out—these are the main manifestations. Second, issues of misappropriation of lending funds are prominent; funds flowing into prohibited areas such as real estate and the stock market, as well as phenomena such as fund ‘empty-turning’ and ‘using new loans to repay deposits’ still exist. Third, violations cover a relatively wide range of institution types. Smaller and mid-sized banks are relatively more concentrated, while large banks more often exhibit higher violation amounts and penalty amounts for individual cases.” Wang Pengbo told the reporter.

In Wang Pengbo’s view, the combined effect of multiple factors has kept lending-business noncompliance issues prominent. On the one hand, there is an imbalance between banks’ internal business performance assessments and compliance management. Under pressures from business scale and profitability, some branches show a tendency to prioritize growth over risk control.

On the other hand, bank internal risk-control execution is not adequate. Although the system build-out is relatively complete, there are weaknesses in implementation. Employees’ compliance awareness and the standardization of their operations still fall short. At the same time, some institutions harbor a sense of luck regarding violations, and their rectification is not thorough enough.

In addition, lending business has a long chain and multiple participating parties. There is some difficulty in regulatory coverage and real-time supervision and control, which leads to continued high incidence of violations.

However, the reporter also noted that judging from the number of penalty cases and the amounts of fines and confiscations in the first quarter, so far this year banking institutions have placed greater emphasis on the legal and compliant operation of lending businesses, especially with regard to lending business, where the nonperforming loan ratio has continued to improve.

From the nonperforming loan data of joint-stock commercial banks whose 2025 performance reports have already been published, it can be seen that, except for a few banks, most joint-stock commercial banks’ lending business has been continuously optimized.

Daily Economic News