香港聯合交易所有限公司
(香港交易及結算所有限公司全資附屬公司)
THE STOCK EXCHANGE OF HONG KONG LIMITED
(A wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited)
The Stock Exchange of Hong Kong Limited
CENSURES:
(1) Ms Li Luyi, former chairman and executive director;
CRITICISES:
(2) Mr Wang Dongfeng, former chairman and executive director;
AND FURTHER DIRECTS:
Each of the above directors to attend training.
In 2019, the Company recorded an impairment loss of nearly RMB100 million in respect of loans it had advanced. The loans were made as part of a new corporate lending business, and the impairment constituted nearly three-quarters of the Company’s total corporate loan receivables at that time. The impairment was necessary because many of the loans were overdue and several of the borrowers had become unreachable.
An investigation established that, for some of these loans, concerns and risk alerts had been raised to Ms Li and Mr Wang during the loan approval process. For example, it was flagged that an applicant’s financial data was questionable, and that the proposed security may be ineffective. Although these risk alerts were accompanied by recommendations to take follow-up action, Ms Li and Mr Wang approved the loans, and there is no record showing that any follow-up action was taken.
The investigation also found that there were several internal control deficiencies in respect of the lending business.
Key messages:
Directors are responsible for ensuring that any lending business is subject to appropriate due diligence and risk management. This is an essential element of their duties to act in and safeguard the issuer’s interests.
A proper audit trail of the commercial assessment and approval process must be kept, particularly if red flags arise. The absence of contemporaneous documentation evidencing that appropriate risk management has been conducted may cast doubt as to its adequacy, lead to issues of concern with the company’s auditors, and reflect poorly on the company’s controls and culture.
|
Ends