China's Citic Bank defrauded of up to $148 million

Media reports state that a branch employee conspired with others to persuade the bank to issue securities using fraudulent documents

Mid-sized Chinese lender Citic Bank has been defrauded of up to $148 million, the company and media reports said, the second such incident in the industry to come to light in a week.

China Citic Bank Corp. said it was involved in a "risk incident" at its branch in the northwestern city of Lanzhou and it could lose up to 969 million yuan ($148 million) as a result, according to a statement to the Hong Kong stock exchange issued yesterday. It gave no details.

Bloomberg News reported that a branch employee conspired with others to persuade the bank to issue securities using fraudulent documents.

The group then re-sold the securities -- bank notes, also known as bills, which are payable to the bearer -- and invested the proceeds on the Chinese stock market, Bloomberg said, citing people familiar with the matter.

Citic Bank, part of the financial conglomerate of the same name, said police were investigating the case.

In a separate incident, reports said two junior employees at a Beijing branch of the Agricultural Bank of China stole bills worth 3.9 billion yuan and sold them, then used the proceeds to invest in the stock market, which boomed last year before collapsing from mid-June.

That bank, one of China's "big four", confirmed the case last week.

Authorities have launched a series of investigations into the financial sector after a debt-fuelled stock market bubble -- encouraged by authorities -- burst in the summer in a rout that wiped out trillions of dollars of market capitalisations.