State-run Bank of China said on Wednesday a recent funds scandal at its Hong Kong arm involved about HK $30 million (US $3.85 million), and media reported the arrest of three former executives over an earlier embezzlement affair.
"The amount of money involved is believed to be around HK $30 million", Xiao Gang, chairman of Bank of China HK and chairman and president of BOC, told reporters on his way to meet Hong Kong's financial regulator, the Hong Kong Monetary Authority.
"The HKMA has sent its special unit to our bank (BOC HK) to investigate the issue," said Xiao.
BOC, the country's largest foreign exchange lender, plans a multi-billion dollar initial public offering by the end of next year, but has been dogged by scandal as it seeks to compete with healthier, more modern banks.
Xiao said the funds were part of an accumulated bonus pool from the formation of BOC Hong Kong through the merger of 10 Bank of China units in 2001.
He added the funds did not affect the bank's balance sheet, but the incident - the second controversy to hit BOC Hong Kong in just over a year - had harmed its reputation, although he added that it should not affect BOC's listing plans.
On Monday, BOC Hong Kong Holdings Ltd said two deputy chief executives had resigned after previously being suspended for allegedly making personal use of off-balance sheet funds.
In the earlier case, the Beijing Youth Daily said on Wednesday that Zhu Chi and Ding Yansheng, along with former general manager Zhang Debao, had been arrested and faced trial for embezzlement.
The three were involved in the case of former chief executive, Liu Jinbao, who was arrested in February on corruption charges, the newspaper quoted a BOC source as saying.
A BOC SPOKESMAN DECLINED TO COMMENT: Liang Xiaoting, another senior BOC chief in Hong Kong, went on trial in Beijing in February for taking bribes totalling HK $2.95 million ($379,500).
In 2002, former BOC chief Wang Xuebing was sacked as head of China Construction Bank over questionable loans during his tenure at BOC. He has since been jailed for 12 years.
Xiao said earlier the bank hoped to replace Zhu and Ding within three months. BOC reports its first-half results on Thursday.
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