SHENZHEN: Former chairman of Shenzhen Development Bank (SDB) Zhou Lin has been arrested because of his alleged involvement in a 1.5-billion-yuan (US$185 million) bad-loan case.

Three former employees of the Shenzhen-listed lender, who quit last year, were also detained in connection with the case, the bank said in a statement yesterday quoting the Shenzhen Public Security Bureau.

SDB is the first bank on the Chinese mainland controlled by a foreign company after US private-equity fund Newbridge Capital acquired 18 per cent of its stakes for US$150 million in late 2004.

It is also the first domestic bank to go public.

In January, the bank rejected media reports that Zhou had been arrested because of malpractice in a case dating back to August 2003 that resulted in bad debts of 1.5 billion yuan.

"It (the case) was left over from the past and our new management is devoted to reforming the bank and actively solving old problems," a spokeswoman for SDB told China Daily yesterday, adding that the bank would co-operate with the police in Zhou's case.

She said Zhou's arrest would have no impact on the bank's operations.

"He left his post as chairman of the board in December, 2004. Since then, he has not participated in the bank's management," she said.

In January, Zhou, 55, was removed from the post of secretary of the bank's Party committee.

Shares in SDB dropped 2 per cent yesterday to end at 6.36 yuan (US$0.78), compared to the broader market's 0.83 per cent fall.

Despite the induction of international strategic partners and a global management team, the bank is plagued by bad loans and capital inadequacy.

SDB will announce its annual report for the 2005 fiscal year on Saturday.

(China Daily 03/31/2006 page1)