A total of 328 banks were fined over 600 million yuan! In the first quarter of this year, both the number and amount of bank penalties decreased month-on-month, with credit violations becoming the "hardest hit" area.

Since 2026, the banking industry has continued to maintain a strong regulatory posture. Regulators have taken a “zero tolerance” approach to illegal and non-compliant conduct by banks and related responsible parties.

Corporate early warning data shows that in the first quarter of this year, 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 penalty notices to banking institutions and practitioners, representing a decrease of 15.88% from the previous quarter (Q4 2025). Of these, 684 were penalties against institutions and 1,017 were penalties against individuals. The amount forfeited was RMB 611 million, down 38.16% from the previous quarter, including RMB 595 million for institutions and RMB 16 million for individuals. A total of 328 penalized banks were involved, up by 7 from the previous quarter.

Image source: Corporate early warning

A reporter from The Daily Economic News (hereinafter referred to as “the reporter”) noticed that in the first quarter of this year, the main focus of banking compliance violations was in lending business. Wang Pengbo, Chief Analyst at Bocom Consulting, told the reporter that, at present, compliance violations in lending business show several relatively obvious features, and the stacking of multiple factors has kept compliance issues in lending business prominent.

A “serious disaster area” for lending compliance violations: “three checks” not performed and funds occupying and being used without authorization are still key causes

In terms of punishing financial institutions for illegal and non-compliant conduct, regulators have always strictly implemented the “dual-penalty system,” legally holding accountable the relevant illegal institutions and individuals. The types of penalties include fines, warnings, prohibitions on engaging in relevant professions or jobs, and so on. For penalties against institutions, fines are the most common type; for penalties against individuals, warnings are the most common type.

The reporter’s review found that in the first quarter of this year, the number of large-value penalty notices at the level of over RMB 1 million decreased. According to data from Corporate early warning, in the 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 127 large-value penalty notices of more than RMB 1 million against banking institutions and practitioners, down by 27 compared with the previous quarter. In addition, the forfeited amounts of these large-value penalty notices decreased significantly compared with the previous quarter.

Among them, China Construction Bank had the highest forfeited amount, at RMB 43.5061 million. Next were Pudong Development Bank (600000) and Hangzhou United Rural Commercial Bank.

Overall, in the first quarter of this year, compliance violations in the banking sector mainly focused on lending business. Corporate early warning data shows that in the first quarter, the number of penalties issued by regulators for lending business compliance violations was 1,043, compared with 1,127 in the previous quarter, a quarter-on-quarter decrease of 7.45%.

Banking compliance violation statistics for Q1 2026 Image source: Corporate early warning

Among them, lending business compliance violations mainly involved failure to properly perform the “three checks” for loans (due diligence before, review during, and management after), violations in processing and issuing loans, and inaccurate classification of loan assets, among others.

The reporter noted that an incomplete internal control system is also a major reason banks were penalized. Specifically, this includes violations of regulations on credit reporting business management, violations of prudent operating rules, and违规 charging fees that are not aligned with the price/quality (charging in a way that the fee does not match the price and quality), and so on. Corporate early warning data shows that in the first quarter of this year, regulators issued 414 penalty notices due to incomplete internal control systems, compared with 450 in the previous quarter, representing a quarter-on-quarter decrease of 8%.

Prioritizing development over risk control: experts analyze the deep-seated reasons behind lending compliance violations

Pursuant to Article 3 of the Law of the People’s Republic of China on Commercial Banks, among the businesses that commercial banks may operate, it is clearly stipulated that they can engage in “the issuance of short-, medium-, and long-term loans,” which directly establishes the legal basis for commercial banks to carry out lending business. Articles 34 to 41 of the law provide specific provisions on the guiding principles for loan business, loan examination and approval, loan guarantees, loan contracts, loan interest rates, and asset-liability ratios, among others.

For a long time, lending business has been a serious “hotspot” for illegal and non-compliant conduct by banks. So what are the main characteristics of lending business compliance violations at present?

“Based on observation and data, current lending business compliance violations mainly show several relatively obvious features: first, the violations are still highly concentrated in the ‘three checks’ stages of loans—failure to duly conduct pre-loan investigations, inspections during the loan stage being superficial, and inadequate post-loan management remain the most prominent forms of manifestation; second, problems involving the unauthorized appropriation and diversion of lending funds are prominent—funds flowing into prohibited areas such as real estate and the stock market, and phenomena such as idle funds and turning loans into deposits (loans being converted into deposits) still exist; third, the coverage of violation cases spans a wide range of institution types—small and medium-sized banks are relatively more concentrated, while large banks more often show higher amounts of non-compliance per single transaction and higher penalty amounts.” Wang Pengbo said to the reporter.

In Wang Pengbo’s view, the stacking of multiple factors continues to keep compliance issues in lending business prominent. On one hand, there is an imbalance between internal business performance assessments and compliance management within banks. Under pressures from business scale and profitability, some branches and sub-branches tend to prioritize development over risk control. On the other hand, internal risk-control implementation within banks is not sufficient—while the system construction may be relatively sound, there are shortcomings in the execution of those systems. Employees’ compliance awareness and the rigor of operational procedures are still insufficient. At the same time, some institutions have a mentality of taking chances regarding violations, and rectification is not thorough enough. In addition, lending business has a long chain and involves many participants, and this makes regulatory coverage and real-time oversight somewhat difficult, which contributes to the continued high incidence of violations.

However, the reporter also noticed that judging from the number of penalty notices and the forfeited amounts in the first quarter, since the beginning of this year, banking institutions have placed greater emphasis on lawful and compliant operations in loan business, especially in lending business, and the rate of non-performing loans has continued to improve.

Based on non-performing loan data from joint-stock commercial banks whose 2025 performance reports have already been published, it can be seen that, aside from a small number of banks, the lending business of most joint-stock commercial banks has been continuously optimizing.

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Cover image source: Liu Guomei

(Editor: Cao Yanyan HA008)

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