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Bank of China's Hong Kong Branch Investigates Possible Embezzlement - 2004-08-09

The Bank of China's Hong Kong operation has suspended two top executives on suspicion of theft, while banking giant HSBC has taken a major stake in another Chinese bank.

BOC Hong Kong, the Hong Kong arm of the Bank of China, has suspended two high-level executives and is investigating a third on suspicion of misallocating over nearly $13 million.

Sources say the executives are suspected of taking the money for personal use, including granting themselves and some staff huge bonuses.

The Hong Kong Monetary Authority, or HKMA, has also launched an investigation into the matter.

Arthur Lau, an analyst in Singapore with investment bank Barclays Capital, says the investigation is in line with BOC's move to adopt international norms. "Given the motivation of the bank to become a truly international bank, I think they will try to be more transparent on these irregularities. Chinese regulators as well as the bank itself would like to restore confidence from the investor," he said.

At present, Mr. Lau says, the workings of the Bank of China still do not come up to international standards. "Is not as transparent as people would like to see because it's China. They work according to their own system," he said.

He believes that whether or not the executives three under investigation are prosecuted, someone will eventually be charged over the embezzlement.

HSBC, one of the largest banking organizations in the world, will pay $1.7 billion for a 20 percent stake in China's Bank of Communications.

This will be the biggest purchase made by a foreign investor in China's banking sector, and the third acquisition in China by London-based HSBC.

The purchase will give HSBC access to more than 2,700 branches in 86 Chinese cities.

In Singapore, a senior Citibank executive has been charged with embezzling almost three million dollars through the bank's computer system. This is one of the largest known cases of cyber theft in Singapore to date. The executive has been charged with 104 separate violations.