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Morning Coffee: Citic Securities and the rise of the scandalous Chinese banker

Citic Securities and the rise of the Chinese banker scandal

Me?

Rewind to 2008 and Chinese bankers could reasonably claim their moral high-ground over their Western counterparts – the financial crisis didn’t immediately claim many Chinese scalps or create many Chinese banking scandals.

Today, while Western bankers continue to behave badly (this week Libor rigger Tom Hayes dominates the headlines) some of their Chinese counterparts appear not so squeaky clean either. The latest banker under pressure isn’t a young princeling working for J.P. Morgan or another foreign bank – he’s a senior leader at China’s largest investment bank. He’s Cheng Boming, president of Citic Securities and the chairman of its international division – a Chinese Gary Cohn .

Citic Securities said in a statement yesterday that Cheng is under police investigation for alleged insider trading, as are two other employees, Yu Xinli, a business-development officer, and Wang Jinling, deputy manager of the firm’s IT centre. This marks a dramatic escalation in an ongoing investigation into Citic. Chinese authorities are probing the brokerage following sharp falls in China’s stock market since the middle of the year.

But in contrast to the media frenzy surrounding banker scandals in the US and Europe, details of the investigation are sketchy. In July the Ministry of Public Security said Vice Minister Meng Qingfeng was conducting an investigation into “abnormal volatility” in the stock market that resulted from what the police agency called “malicious short selling of stocks and stock indicies”.

The Wall Street Journal alleges that  Citic Securities had promoted new investment products, in particular cross-border equity swaps that were popular with global hedge funds. The swaps gave foreigners a way to avoid quotas that limit their participation in China’s markets because the transactions were initiated in Hong Kong, according to the newspaper.

The Chinese government has been conducting a wide-ranging anti-corruption drive this year and it is clear that those in the top ranks of the country’s banks no longer have anywhere to hide.

Meanwhile:

Houston Huang Guobin to join J.P. Morgan from Goldman Sachs as China IB head. (Finance Asia)

ANZ CEO Mike Smith may retire within a year. (The Australian)

Jury out on Mike Smith’s Asian adventures at ANZ. (The Australian)

Tom Hayes, the U-turn. (Wall Street Journal)

China takes aim at automated trading in commodities futures. (Reuters)

China cracks down on ‘illegal’ stock trading accounts. (Business Times)

The Goldman Sachs-backed “Bloomberg Terminal killer” is ready for launch. (Quartz)

Three independent listing committees to improve regulatory framework at SGX. (Straits Times)

Deutsche Bank said to weigh job cuts on top of Postbank sale. (Bloomberg)



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