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

Ask AI · Why Does Credit Violations Continue to Be a Major Area of Penalties for Banks?

Our reporter: Panting Edited by: Wei Wenyu

Since 2026, the banking industry has maintained a strong regulatory stance, with regulatory authorities adopting a “zero tolerance” attitude toward illegal and non-compliant behaviors of banks and related responsible persons.

Data from the Enterprise Early Warning System shows that in the first quarter of this year, the People’s Bank of China, the China Banking and Insurance Regulatory Commission, the State Administration of Foreign Exchange and its dispatched agencies issued a total of 1,701 fines to banking institutions and practitioners, a decrease of 15.88% from the previous quarter (Q4 2025), including 684 fines on institutions and 1,017 on individuals. The total fines and confiscations amounted to 611 million yuan, a 38.16% decrease from the previous quarter, with 595 million yuan from institutions and 16 million yuan from individuals. A total of 328 banks were penalized, an increase of 7 from the previous quarter.

Image source: Enterprise Early Warning System

The “Daily Economic News” reporter (hereinafter referred to as “the reporter”) noted that in the first quarter of this year, the main areas of bank violations concentrated in credit business. Wang Pengbo, chief analyst at Broadcom Consulting, told the reporter that current credit violations show several obvious characteristics, with multiple factors stacking up to keep the issue prominent.

Credit Violation “Major Area”: “Three Checks” Absence and Capital Occupation Still Main Causes

In penalizing financial institutions for illegal activities, regulatory agencies always strictly enforce the "dual penalty system,"依法追究相关违法机构和个人的责任。处罚种类涵盖罚款、警告、禁止从事相关职业或工作等。在针对机构的罚单中，罚款是最为常见的处罚类型；在针对个人的罚单中，警告则是最为常见的处罚类型。

Our analysis shows that in the first quarter of this year, the number of large fines exceeding one million yuan decreased. According to data from Enterprise Early Warning, in Q1, the People’s Bank of China, the China Banking and Insurance Regulatory Commission, the State Administration of Foreign Exchange and its dispatched agencies issued a total of 127 large fines over one million yuan to banks and practitioners, a decrease of 27 from the previous quarter, and the amount of fines and confiscations was significantly reduced compared to the previous quarter.

Among them, China Construction Bank had the highest confiscated amount, reaching 43.5061 million yuan. Followed by Shanghai Pudong Development Bank and Hangzhou United Rural Commercial Bank.

Overall, in the first quarter of this year, the main focus of bank violations was on credit business. Data from Enterprise Early Warning shows that in Q1, the number of fines issued for violations in credit business reached 1,043, a 7.45% decrease from 1,127 in the previous quarter.

Statistics of bank violations in Q1 2026 Image source: Enterprise Early Warning System

Main violations in credit business mainly involved inadequate “three checks” before lending, illegal loan processing and issuance, and inaccurate classification of credit assets.

The reporter also noted that poor internal control systems are a major reason for penalties, including violations of credit reporting management regulations, violations of prudent operation rules, illegal charges, and discrepancies between price and quality. Data from Enterprise Early Warning shows that in Q1, 414 fines were issued due to inadequate internal control systems, an 8% decrease from 450 in the previous quarter.

Overemphasis on development, neglect of risk control: Experts analyze the deeper reasons for credit violations

According to Article 3 of the “Commercial Bank Law of the People’s Republic of China,” the business scope of commercial banks explicitly includes “issuing short-term, medium-term, and long-term loans,” which directly establishes the legal basis for banks to conduct credit business. Articles 34 to 41 of this law specify guiding principles for loan business, loan review and approval, loan guarantees, loan contracts, interest rates, and asset-liability ratios.

For a long time, credit business has been a major area of violations for banks. So, what are the main characteristics of current credit violations?

“From observation and data, current credit violations mainly show several obvious features: first, violations are still highly concentrated in the ‘three checks’ stage—insufficient pre-loan investigation, superficial loan review during the process, and inadequate post-loan management remain the main forms; second, issues of illegal diversion of loan funds are prominent, with funds illegally flowing into prohibited areas such as real estate and stock markets, as well as phenomena like fund circularity and converting loans into deposits; third, violations involve a wide range of institutions, with small and medium-sized banks more concentrated, while large banks tend to have higher single-incident violation amounts and penalties,” Wang Pengbo told the reporter. He added that the forms of credit violations now are intertwined with traditional credit, credit cards, and inclusive finance, showing diversified features.

In Wang Pengbo’s view, multiple factors stack up to keep credit violations prominent. On one hand, there is an imbalance between internal business assessment and compliance management within banks, with some branches prioritizing development over risk control under pressure for scale and profit. On the other hand, internal risk control execution is insufficient; although制度建设相对完善但落地执行存在短板，员工合规意识和操作规范性仍有不足。同时，部分机构对违规行为存在侥幸心理，整改不够彻底。此外，信贷业务链条长、参与主体多，监管覆盖和实时管控存在一定难度，也就导致违规问题持续高发。

However, the reporter also noted that based on the number of fines and the amount confiscated in Q1, banks have become more focused on legal and compliant operation of loan businesses, especially in credit, with non-performing loan ratios continuing to improve.

From the published 2025 performance reports of joint-stock commercial banks, most have shown ongoing improvement in their credit quality, with only a few exceptions.

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

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