Over 10 million yuan fined in half a year! Jinhua Bank repeatedly faces compliance issues, with capital adequacy ratio under continuous pressure

Securities Star Zhao Zixiang

Recently, the Jinhua Regulatory Branch of the National Financial Regulatory Administration issued a fine of one million yuan to Jinhua Bank, citing multiple violations such as inadequate employee behavior management and insufficient “three checks” in lending, among others. Several individuals were also prohibited from working in the banking industry.

Securities Star notes that this is not the first time the bank has faced strict regulatory action. Looking back to August 2025, the Zhejiang Branch of the People’s Bank of China fined it 7.175 million yuan for up to eight violations. This means that within just half a year, Jinhua Bank has accumulated fines exceeding 10 million yuan.

Behind the frequent compliance issues, the bank’s capital adequacy indicators are also under pressure. In the first three quarters of 2025, the bank’s core Tier 1 capital adequacy ratio dropped from 8.75% to 8.42%, while risk-weighted assets increased from 79.574 billion yuan to 81.013 billion yuan, continuing to strain capital consumption. On the scale expansion versus risk control balance, this regional city commercial bank in central Zhejiang is facing a severe test.

Frequent Fines Signal Red Flags in Compliance System

On February 9, the Jinhua Regulatory Branch of the National Financial Regulatory Administration publicly disclosed that Jinhua Bank was fined 3.7 million yuan for violations including inadequate employee behavior management, insufficient “three checks” in lending, and improper use of loan funds.

At the same time, four responsible personnel were warned, and five individuals were banned from working in banking. Among them, three were prohibited for five years, and two for one year. This penalty not only involves a significant amount but also directly exposes core weaknesses in the bank’s internal control management.

In fact, this is not the first time Jinhua Bank has been singled out by regulators for compliance issues. On August 28, 2025, the Zhejiang Branch of the People’s Bank of China issued an administrative penalty decision, fining the bank 7.175 million yuan and issuing a warning.

The reasons for this penalty included violations of account management regulations, anti-money laundering regulations, credit information management rules, among others—covering eight specific violations. The wide scope of business lines involved and the variety of violations highlight systemic shortcomings in the bank’s compliance management.

From the details of the fines, the focus in 2026 will be on two core areas: credit business and employee management. Issues such as inadequate “three checks” in loans and misappropriation of funds directly reflect failures in credit approval, post-loan management, and risk control in key processes.

In addition, inadequate employee behavior management reveals weaknesses in internal supervision and professional ethics development. Notably, multiple individuals being banned from working in banking indicates that regulators have recognized the seriousness of internal control failures at a mid-to-high level.

Within just half a year, Jinhua Bank has been fined a total of 10.875 million yuan. This figure not only serves as an economic penalty for violations but also reflects a lag in building a compliance culture. For a city commercial bank, compliance is the bottom line for survival and growth. The dense issuance of fines often indicates that during rapid expansion, the bank’s emphasis on compliance and risk control has not kept pace, leading to ongoing risk accumulation.

Capital Adequacy Under Pressure, Risk-Weighted Assets Continue to Grow

While compliance issues are frequent, Jinhua Bank’s capital adequacy also showed a “rise and fall” trend in the first three quarters of 2025, with fluctuations in key indicators and continuous expansion of risk-weighted assets, further increasing capital consumption pressure.

According to publicly disclosed capital adequacy data, at the end of Q1 2025, the bank’s consolidated capital adequacy ratio was 11.46%, with a Tier 1 capital adequacy ratio of 8.75%, and a core Tier 1 capital adequacy ratio of 8.75%. By the end of Q2, these had risen to 12.16%, 9.69%, and 9.06%, respectively, indicating a brief improvement in capital status. However, by the end of Q3, they fell back to 11.58%, 9.04%, and 8.42%, with the core Tier 1 capital adequacy ratio dropping below the beginning-of-year level.

The fluctuation in core Tier 1 capital net amount is a key factor affecting the change in capital adequacy ratio. At the end of Q1 2025, the bank’s core Tier 1 capital net was 6.959 billion yuan; by the end of Q2, it increased to 7.281 billion yuan, mainly due to the turnaround of accumulated other comprehensive income from negative to positive (from -220 million yuan to 640 million yuan). But by the end of Q3, it sharply declined to 6.821 billion yuan, with accumulated other comprehensive income turning negative again and worsening significantly to -421 million yuan, directly eroding the core capital base.

Meanwhile, the continuous expansion of risk-weighted assets further amplifies capital consumption pressure. At the end of Q1 2025, total risk-weighted assets were 79.574 billion yuan; by the end of Q2, they increased to 80.357 billion yuan, and by the end of Q3, further to 81.013 billion yuan, with a cumulative increase of 1.439 billion yuan in the first three quarters. Against the backdrop of fluctuating net capital, the ongoing growth of risk assets has expanded the denominator in the capital adequacy ratio, further squeezing capital buffers.

For banks, a strained capital adequacy ratio often constrains business expansion and risk resilience. On one hand, the decline in core Tier 1 capital adequacy ratio indicates weakened capacity to absorb losses, making the bank more vulnerable to capital shortfalls during economic downturns or asset quality deterioration.

On the other hand, the continuous growth of risk-weighted assets increases capital consumption in lending and interbank activities. If profit growth cannot keep pace, the downward trend in capital adequacy ratio will be difficult to reverse.

The dense fines and capital pressures together outline Jinhua Bank’s current development dilemma. As a regional city commercial bank serving central Zhejiang, it plays an important role in supporting local economy and small micro enterprises. However, shortcomings in compliance management and capital consumption have become significant obstacles to high-quality development.

From a compliance perspective, Jinhua Bank needs to fundamentally reshape its compliance culture, embed compliance requirements throughout all business processes, strengthen internal supervision and accountability mechanisms, and avoid a tendency to prioritize business over compliance.

From a capital perspective, the bank must balance scale expansion with risk control, optimize asset structure, improve profitability, and actively explore diversified capital replenishment channels to enhance capital buffers.

For Jinhua Bank itself, the key to breaking the deadlock lies in recognizing problems, addressing weaknesses, and re-establishing a balance between scale and quality, development and safety based on compliance and risk control. (This article first published by Securities Star, author | Zhao Zixiang)