2014-07-14

SCMP Gets It: CCTV Attack on Bank of China Reveals Power Struggle

Initially it looked like the CCTV report on BOC You Huitong was part of the anti-corruption campaign, but as it has emerged that Bank of China was part of a PBOC pilot reform project, the two likely stories here are either Bank of China's low level staff didn't follow procedures (and made stupid statements to potential clients) or CCTV is looking to damage the pilot project. Judging by the way the money laundering angle was played up in the press, the second case is looking more and more likely.

Bank of China-CCTV drama may reveal power struggle in Beijing
For example, at the ground level in a BOC branch in, say, wealthy Guangdong, there may indeed be doubts about whether bank staff carefully review the source of a client's income. If a senior civil servant, unlikely to earn more than 1 million yuan (HK$1.25 million) a year, walked into a Guangdong BOC branch and wanted to transfer 10 million yuan overseas, would bank staff ask such an important client how they made their money? If not, it means there's a loophole in the process.

At the top management level, it is not possible that senior BOC executives would have purposely designed a system to help rich clients "wash the money", the literal translation of "money laundering" in Chinese. But BOC, listed in both Shanghai and Hong Kong, may be under growing pressure to compete with domestic and international banks. So when the central bank wanted to launch some new foreign exchange business experiments, BOC was naturally excited to be chosen as a pioneer bank to do so.

Interestingly, some sources suggest the CCTV report may reflect growing power struggles within the mainland's banking system. Even inside the central bank, it may not be the case that everyone really listens to top boss Zhou Xiaochuan's ideas. Zhou is known as a reformer who wants to make the yuan more global, but there are also many conservative officials in Beijing.

How the BOC-CCTV drama ends may offer some new clues to these power struggles.

No comments:

Post a Comment