China Development Bank fined heavily for providing guarantee for HNA in the autumn

The HNA Group (HNA) logo on top of a building in Beijing, China.

The Hainan branch of the Communist Party of China Development Bank (CDB) was recently fined 42.66 million yuan for providing external guarantees to HNA Group without authorization.

According to Caixin News, administrative punishment information released on March 10 on the official website of the Hainan branch of the State Administration of Foreign Exchange (SAFE) shows that the Hainan branch of CDB was fined 42.661 million yuan (RMB, the same below) and warned for providing external guarantees without authorization, in violation of SAFE’s foreign exchange management regulations on cross-border guarantees.

In 2017, in the process of issuing a loan to Dah Xinhua Airlines (Hong Kong) Limited, an affiliate of HNA Holdings, an overseas branch of a major state-owned bank, CDB Hainan Branch illegally issued a guarantee letter to HNA Holdings, which provided a guarantee for Dah Xinhua Airlines. This loan involved an amount of 2 billion yuan.

At the end of January this year, CDB Hainan Branch was ordered by the Hainan Branch of the Bureau of Foreign Exchange to make rectification within a certain period of Time and fined RMB1 million and confiscated RMB10,979,100 in proceeds for handling the receipt and payment of current account funds and failing to reasonably examine the authenticity of transaction documents and their consistency with foreign exchange receipts and payments.

CDB is the largest creditor of HNA, and HNA Group received more than RMB 80 billion in loans from CDB, of which CDB Hainan Branch is the main source.

In the expansion of HNA Group, internal and external loans have been one of its important financing tools, but internal and external loans have brought huge risks to the mainland financial community.

According to HNA Group’s 2019 semi-annual report, as of the end of the first half of 2019, the company had total assets of 980.621 billion yuan and total liabilities of 706.726 billion yuan, with an asset-liability ratio of 72.07%.

A number of interviewees said that the asset situation of HNA Group is far more serious than this, and there are a large number of internal and external loans, commercial paper financing, trust financing and dark insurance financing in its expansion process, and it is even more unknown how much off-balance sheet liabilities bottom, how much water in assets and net assets.

In the afternoon of Jan. 29 this year, HNA Group Co., Ltd. and its three core listed companies, HNA Holdings, HNA Foundation and Supply & Marketing Group, announced that they had entered into bankruptcy restructuring one after another, and announced that they had investigated a total of more than 100 billion yuan of irregular accounts and irregular guarantees, of which irregular accounts totaled 61.482 billion yuan and irregular guarantees also amounted to 46.716 billion yuan.

There has been news that HNA Group is the white glove of the Chinese Communist Party‘s power elite.

There are also comments that on March 10, just after the end of the two sessions of the Communist Party, it was revealed that China Development Bank was fined for irregular loans to HNA Group, which may be related to the power struggle at the top of the Communist Party.