Hidden Risk
Detecting Fraud in Chinese Banks’ Non-performing Loan Data
DOI:
https://doi.org/10.20525/ijfbs.v11i1.1550Keywords:
China, Banking, Non-performing loans, Fraud, Benford distributionAbstract
Using self-reported data from banks in mainland China, I apply a technique used in forensic accounting based on Benford’s Law to detect fraudulent manipulation of non-performing loan (NPL) figures. I find large data anomalies consistent with false reporting in mainland banks that do not appear in an identically structured survey of Hong Kong banks. A comparison of different types of data from mainland banks shows no statistically significant anomalies in data for total deposits from customers, operating expenses, net interest income, or non-interest income.
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