(Yicai Global) Oct. 26 -- A customer of China Bohai Bank claims to have lost CNY500 million (USD78.3 million) after the lender used its deposits without authorization as loan guarantees.

Jiangxi Jemincare Group is accusing Bohai Bank of using CNY2.8 billion (USD438 million) of its deposits at the lender’s Nanjing branch as financial guarantees without permission, the Chinese pharmaceutical firm said on its WeChat account. When borrower Huaye Petrochemical Nanjing failed to repay a debt on time, CNY500 million was taken from Jemincare’s account on Aug. 25 and has yet to be returned.

The matter has been reported to the public security authorities and the lender is seeking legal advice, Tianjin-based Bohai Bank said on Oct. 24 and Oct. 25, without going into any further details.

If it is proven that Nanchang-based Jemincare was unaware of the situation, then it may be a case of the lender operating in collusion with the other company to give false guarantees, an executive at a large state-owned bank told Yicai Global. This has happened before in the past, but rarely.

If a bank wants to use deposits for loan pledges, a contract needs to signed by the parties involved showing that everyone is in agreement and detailing the amount and period of the guarantee, he added. All documents must bear the companies’ official seals and the signatures of the authorized representatives. Also, according to the Civil Code, bank deposits cannot be pledged as collateral, only certificates of deposit.

To make matters more complicated, the parent firm of Huaye Petrochemical was named by Beijing Huachang Real Estate last month as one of a number of companies that had falsely registered under it.

Editor: Kim Taylor