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.

Each Daily Reporter｜Pan Ting    Each Daily Editor｜Wei Weny i

Since 2026, the banking industry has continued to maintain a strong stance of strict supervision. Regulators have taken a “zero tolerance” approach toward illegal and noncompliant conduct by banks and relevant responsible persons.

According to corporate early-warning data, 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 against banking institutions and practitioners, for violations in which banks and industry personnel were involved. This is down 15.88% from the previous quarter (Q4 2025). Of these, 684 were penalties imposed on institutions and 1,017 on individuals. The total amount of fines and confiscations was 611 million yuan, down 38.16% from the previous quarter, including 595 million yuan for institutions and 16 million yuan for individuals. The number of punished banks was 328, up 7 from the previous quarter.

Image source: Corporate Early Warning

The reporter of The Daily Economic News (hereinafter referred to as “Daily Economic News reporter”) noted that in the first quarter of this year, the main areas of banking noncompliance were concentrated in lending business. Wang Pengbo, chief analyst at Bowen Consulting, told the Daily Economic News reporter that, at present, lending business noncompliance shows several relatively clear characteristics, and multiple factors combined have led lending noncompliance issues to remain prominent.

The “worst-hit areas” of lending noncompliance: failure to perform the “three checks” and funds being occupied are still key causes

In dealing with illegal and noncompliant conduct by financial institutions, regulators have always strictly implemented the “dual-punishment system” and, in accordance with law, held accountable both the relevant illegal institutions and individuals. Types of penalties include fines, warnings, and prohibitions from engaging in related professions or work. For penalties imposed on institutions, fines are the most common type; for penalties imposed on individuals, warnings are the most common type.

The Daily Economic News reporter’s review found that in the first quarter of this year, the number of large penalty notices at the level of over 10 million yuan 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 cumulatively issued 127 large penalty notices of over 10 million yuan against banking institutions and practitioners, down 27 compared with the previous quarter. In addition, the amounts of fines and confiscations of the large penalty notices decreased by a significant margin versus the previous quarter.

Among them, China Construction Bank had the highest amount of fines and confiscations, reaching 43.5061 million yuan. Next were Shanghai Pudong Development Bank and Hangzhou United Rural Commercial Bank.

Overall, in the first quarter of this year, banking noncompliance was mainly focused on lending business. Corporate Early Warning data shows that in the first quarter, the number of penalty notices issued by regulators for violations in the lending business reached 1,043, compared with 1,127 in the previous quarter, a quarter-over-quarter decrease of 7.45%.

Statistics of banking noncompliance in Q1 2026 Image source: Corporate Early Warning

Among them, lending business noncompliance was mainly concentrated in failures to properly perform the “three checks” on loans, improper handling and issuance of loans, and inaccurate classification of loan assets, among other issues.

The Daily Economic News reporter noted that inadequate internal control systems are also a major reason why banks are punished. Specifically, this includes violating provisions on credit reporting-related business management, violating prudent operating rules, improper charging, charges not matching the quality/value, and so on. Corporate Early Warning data shows that in the first quarter of this year, regulators issued 414 penalty notices due to inadequate internal control systems, down 8% quarter-over-quarter from 450 in the previous quarter.

Prioritize development over risk control: experts analyze the deeper causes of lending violations

Pursuant to Article 3 of the Law of the People’s Republic of China on Commercial Banks, among the businesses that commercial banks are allowed to operate, it clearly covers “making short-term, medium-term, and long-term loans,” which directly establishes the legal basis for commercial banks to conduct lending business. Articles 34 through 41 of the law set out specific provisions on the guiding principles for loan business, loan review and approval, loan guarantees, loan contracts, loan interest rates, and asset-liability ratios, among other aspects.

For a long time, lending business has been a “worst-hit area” for illegal and noncompliant conduct by banks. So, what are the main characteristics of lending business noncompliance at present?

“From what we observe and the data, current lending business noncompliance mainly shows several fairly obvious characteristics: first, noncompliant conduct remains highly concentrated in the ‘three checks’ stage of loans—failure to properly conduct pre-loan investigations, loan-in-process reviews becoming a mere formality, and inadequate post-loan management are still the most prominent forms of expression; second, problems of misappropriation of lending funds for noncompliant purposes are prominent—funds flowing into prohibited areas such as real estate and the stock market, as well as phenomena like idle fund rotation and ‘using new loans to replace deposits’ (loans used to make deposits), still exist; third, the coverage of institution types affected by noncompliance is relatively broad—smaller and medium-sized banks are relatively more concentrated, while larger banks more often show higher noncompliant amounts and higher penalty amounts for individual cases.” Wang Pengbo told the Daily Economic News reporter that, at present, lending business noncompliance patterns are intertwined with traditional lending, credit card, inclusive finance, and other businesses, showing diversified characteristics.

In Wang Pengbo’s view, multiple factors combined lead to lending business noncompliance issues remaining prominent. On the one hand, there is an imbalance between internal business performance assessments and compliance management within banks. Under business scale and profitability pressure, some branches show a tendency to prioritize development over risk control. On the other hand, internal risk-control execution within banks is not sufficiently in place. Although the system-building is relatively complete, there are shortcomings in implementation on the ground, and employees still have insufficient compliance awareness and insufficient operational standardization. At the same time, some institutions harbor a sense of luck or complacency regarding noncompliant conduct, and corrective actions are not thorough enough. In addition, lending business has a long chain and multiple participating parties, and there are certain difficulties in terms of regulatory coverage and real-time monitoring and control, which also leads to noncompliance issues continuing to occur at high frequency.

However, the Daily Economic News reporter also noted that, judging from the number of penalty notices and amounts of fines and confiscations in the first quarter, bank institutions have placed greater emphasis on the legal and compliant operation of lending business since the beginning of this year—especially in the lending business—with the nonperforming loan ratio continuing to improve.

Based on the nonperforming loan data of joint-stock commercial banks whose performance reports for 2025 have already been released, it can be seen that, aside from a few banks, most joint-stock commercial banks’ lending business has been continuously improving.

Disclaimer: The contents and data in this article are for reference only and do not constitute investment advice. Please verify before using. Operate at your own risk.

Cover image source: Liu Guomei