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Author | Liu Yinping
Editor | Fu Ying
Source | Dujiao Finance
Former president of Nanjing Bank (601009.SH), Shu Hangnong, known as the &#34;pioneer of the bond market,&#34; was sentenced to five and a half years in prison due to an old case that had been sealed for over a decade. Recently, the 4th volume of the &#34;Guidance on the Trial of Occupational Crimes&#34; organized by the Second Criminal Division of the Supreme Court disclosed this meticulously designed major case of &#34;embezzlement of public funds.&#34;
In 2009, Shu Hangnong, then vice president of Nanjing Bank, took advantage of his position to illegally use 480 million yuan of the bank's reserve funds to prematurely redeem a wealth management product, and then issued a new wealth management product to connect, with the aim of benefiting himself. Shu Hangnong personally invested 7.5 million yuan to purchase this wealth management product, earning 15.75 million yuan from it, with a return rate of 210% over 14 months.
The case reveals how financial executives exploit loopholes in regulations to create lucrative games tailored for insiders, and also reflects significant deficiencies in Nanjing Bank's internal control system and power balance mechanisms. In the years following Shu Hangnong's imprisonment, the internal control shortcomings of Nanjing Bank were not completely rectified due to the fall of the former president; instead, problems continued to emerge in the credit business sector.
The case dates back to 2006 when the China Development Bank issued a credit asset securitization product named &#34;KY01,&#34; with a total scale of about 5 billion yuan. The bonds were divided into three tiers: A, B, and C. Tiers A and B were publicly issued to the market, with low risk and priority repayment; tier C was a &#34;subordinated tier,&#34; privately issued to specific investors or entities, which could only profit after the repayment of tiers A and B, but had a higher potential return and leveraged characteristics.
As one of the underwriters, Mo and Liu from Company J quickly sensed an opportunity. They judged that the underlying assets of this product were of high quality and had significant investment value. To seek personal benefits, they needed a &#34;financial backer&#34; to leverage this business. Their target was Nanjing Bank, which was gaining momentum in the bond market at the time.
At that time, Shu Hangnong served as vice president of Nanjing Bank, overseeing the Capital Operation Center, while Dai Juan was the deputy general manager of that center. Mo and Liu approached Shu Hangnong and Dai Juan, proposing a &#34;win-win&#34; plan: Nanjing Bank would issue a tiered wealth management product specifically to raise funds to purchase the aforementioned tier C bonds.
In June 2008, Nanjing Bank issued the &#34;Ju Fu No. 1&#34; wealth management product, raising 425 million yuan, and carefully designed a two-tier structure of &#34;stable level&#34; and &#34;aggressive level.&#34; Among them, 365 million yuan of the &#34;stable level&#34; was sold to the public, with an agreed annualized return of 9%; while only 60 million yuan of the &#34;aggressive level&#34; was &#34;locked in&#34; by insiders, with subscribers including Shu Hangnong, Dai Juan, Mo, Liu, and more than 70 others. This meant that once the product was profitable, the priority level would receive fixed returns, while the aggressive level would obtain the vast majority of excess profits after deducting costs
To ensure that they could &#34;optimize&#34; returns at any time in the future, Shu Xingnong and others deliberately embedded a hint in the product agreement: to add an &#34;early termination clause.&#34; As long as the conservative level reaches an annual return of 9%, early liquidation can occur.
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After &#34;Jufu No. 1&#34; operated for half a year, market interest rates began to decline. Mo and others keenly realized: By terminating the old product early and issuing a new product with a lower yield, as long as the yield of the new product's conservative level is below 9%, the aggressive level's yield can further soar.
However, they faced a core dilemma: how to pay out over 400 million yuan for &#34;Jufu No. 1&#34; without alarming public investors or exposing internal personnel holding the aggressive level?
After failing to find external bridge financing, Shu Xingnong and others turned their attention to Nanjing Bank's own &#34;reserve funds.&#34;
Bank reserve funds are prepared to ensure the ability to pay deposits and asset liquidity, consisting of cash on hand and deposits held at the People's Bank of China. The use of reserve funds must be based on genuine business needs, such as customer withdrawals, remittances, interbank settlements, etc.
To this end, Shu Xingnong and others carefully crafted a set of statements: they falsely claimed that the macroeconomic recovery had led to an increase in corporate default rates, that the China Development Bank was undergoing a share reform, and that the underlying asset &#34;KY01&#34; had deteriorated sharply, posing significant risks. Based on this, they proposed to the bank to immediately use the reserve funds to pay out &#34;Jufu No. 1&#34; early to &#34;prevent and control risks.&#34;
This proposal was met with clear opposition from multiple departments, including the personal business department and risk control department, which believed that the risk description lacked basis and that early payout could instead raise investor doubts. However, under Shu Xingnong's strong push, the plan was ultimately forcibly approved at the president's office meeting.
In July 2009, Shu Xingnong and others used over 480 million yuan from Nanjing Bank's reserve funds to pay out &#34;Jufu No. 1&#34; early at a conservative level annualized return of 9% and an aggressive level annualized return of 33.89%. Subsequently, they issued a new financial product to connect, raising 490 million yuan, thus completing a &#34;hand-over&#34; game.
The yield of the new product's conservative level was significantly reduced from 9% to 4%, which also meant that more returns were transferred to the aggressive level. The number of subscribers at the aggressive level dropped sharply from 70 to 21, further narrowing the core circle to Shu Xingnong, Dai Juan, Mo, Liu, and a few others. The tailor-made financial products, seemingly flawless, buried hidden dangers for the future exposure ten years later.
This game of fund maneuvering did not come to light until ten years later.
On February 20, 2019, an announcement from Nanjing Bank attracted market attention, stating that Dai Juan, general manager of the bank's asset management business center, Dong Wenzhao, deputy general manager of the funds operation center, and Li Yan, deputy general manager of the bank's public fund institution Xinyuan Fund, could not perform their duties normally due to personal reasons.
Subsequently, the market reported that five days before the announcement of the issuance, Dai Juan and Dong Wenzhao were taken away together from their office, and Li Yan was also among those taken away for investigation, nominally for &#34;assisting in the investigation.&#34; This matter may be related to Class C accounts in the bond market, and there may be significant interest transfers involved.
In May of the same year, Shu Xingnong suddenly resigned as president of NJBK and was transferred to serve as vice chairman of Nanjing New Agricultural Development Group. It is noteworthy that NJBK did not thank him for his contributions in the resignation announcement, which is contrary to convention. In mid-June, news emerged that Shu Xingnong had been &#34;taken away.&#34; Although he quickly responded that it was &#34;false,&#34; he resigned from all positions in November of the same year, completely fading from public view. It wasn't until recently that the Supreme Court disclosed the ins and outs of the case.
In this case, Shu Xingnong personally invested 7.5 million yuan and ultimately made a profit of 15.75 million yuan, with a return rate of 210% over 14 months. Other internal subscribers also received substantial returns proportionally. However, NJBK, as the entity bearing the risk, ultimately only gained a few million yuan in profit.
According to the &#34;Guidelines for the Trial of Job-related Crimes,&#34; it was disclosed that Shu Xingnong voluntarily surrendered, and as a state worker, he took advantage of his position to misappropriate public funds for personal profit-making activities, which was serious enough to constitute the crime of misappropriation of public funds. Among them, Shu Xingnong played a major role in the joint crime and was the principal offender; Liu was a secondary participant and was given a lighter sentence according to the law.
According to the first-instance court's judgment, Shu Xingnong was sentenced to five years and six months in prison, and Liu was sentenced to one year and two months, with all illegal gains confiscated. After Shu Xingnong appealed, the second-instance court upheld the original judgment. From the timeline, Shu Xingnong may have already completed his sentence and been released.
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The key point in this case is not that Shu Xingnong also participated in the investment; in fact, bank employees can also purchase the bank's financial products.
Wang Pengbo, chief analyst of the financial industry at Botong Consulting, stated: &#34;The overall requirements for bank employees purchasing their own bank's financial products should be consistent with those of ordinary customers, and they cannot enjoy special discounts, priority quotas, or additional returns. Employees in key positions must also register their declarations, and they cannot use their position information and authority to seek convenience for themselves or related personnel; the risk level of the products must also match their own situation.&#34;
&#34;Regulators do not allow employees to profit from undisclosed information for themselves or others, nor can they leak relevant information. Banks must establish a sound internal management and accountability mechanism, and once violations occur, regulators will take measures such as penalties and bans based on the circumstances; those suspected of crimes will also be held criminally responsible,&#34; Wang Pengbo said.
A product &#34;tailored&#34; for insiders, a set of fund transfer operations, especially since Shu Xingnong's request to use the company's reserve funds has raised significant doubts and risks identified by multiple departments within the company, yet the proposal was still approved, with public funds flowing into personal profit-making activities. This case has exposed multiple loopholes in NJBK's nested financial products, tiered design, and internal controls
This case also serves as a wake-up call for the entire financial industry: when power and interests are deeply intertwined, only true hard constraints and transparent supervision can safeguard the bottom line of compliance.
The case of Shu Xingnong lasted nearly 7 years, and with the Supreme Court disclosing the trial results, it marks the legal conclusion of the case. The direct impact on Nanjing Bank has been largely digested, and the bank's current operations and stock price are no longer constrained by this case. However, the compliance and internal control shortcomings exposed by this case remain a practical challenge faced by the bank.
At the end of 2019, when Shu Xingnong was investigated, Nanjing Bank was fined and confiscated 6.2377 million yuan due to 13 violations, five of which targeted wealth management business, including issues such as adjusting returns among wealth management products, exceeding the limit on non-standard investments, illegal investments in equity assets, and insufficient separation of wealth management funds from proprietary funds. It is evident that the wealth management business was once a concentrated area of compliance risk.
With the release of new asset management regulations, the gradual breaking of rigid redemption for wealth management products, and the independent operation of wealth management subsidiaries, the number of violations in the wealth management industry has significantly decreased in recent years. The previously common issues of &#34;fund pool operations, multi-layer nesting, non-standard excess, and adjusting returns&#34; have been fundamentally curbed.
At the end of 2020, Nanjing Bank was warned and fined 7.5688 million yuan for violating anti-money laundering regulations, marking the largest single fine in nearly six years, with four responsible individuals being penalized accordingly.
From the million-level fines imposed on Nanjing Bank in recent years, they are highly concentrated in the credit sector. In March 2023 and January 2024, the Suqian branch of Nanjing Bank received two fines of 2.55 million yuan and 2 million yuan, respectively, due to issues such as inadequate loan inspections. In May 2024, January 2025, and March 2026, the Huai'an branch, Taizhou branch, and Hangzhou branch were also fined 2.65 million yuan, 1.45 million yuan, and 1.85 million yuan, respectively, for violations in credit business.
Since 2025, the total amount of fines imposed on the company and related responsible individuals has reached 7.63 million yuan, with the fines for credit business violations accounting for the majority.
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From the performance forecast disclosed by Nanjing Bank, the growth momentum in 2025 is strong, with total assets exceeding 3 trillion yuan, operating income and net profit attributable to the parent company being 55.54 billion yuan and 21.807 billion yuan, respectively, representing year-on-year growth of 10.48% and 8.08%. Among them, net interest income increased by 31.08% year-on-year to 34.902 billion yuan, which is the primary factor driving performance growth.
Against the backdrop of weakened loan demand, Nanjing Bank achieved a loan scale increase of 13.37%, far exceeding the industry average. The rapid expansion of credit scale, accompanied by a high incidence of violations, indicates that the bank may have issues of prioritizing scale over quality during its expansion process
The dense credit penalties reflect execution loopholes in the entire process of pre-loan investigation, in-loan review, and post-loan management by banks.
Although the current non-performing loan rate has not significantly deteriorated and remains at a relatively low level of 0.83%, the quality of personal loans is under pressure, with the non-performing rates of personal housing loans, consumer loans, and business loans rising compared to the end of the previous year in the first half of 2025.
From executive corruption to credit violations, Nanjing Bank is facing not only operational risk control loopholes but also systemic challenges in corporate governance. If internal control rectification lags behind scale expansion, potential risks are continuously accumulating, and future asset quality may face downward pressure. As the case of Shu Hangnong warns: the biggest risk for banks may not come from the market, but from the internally uncontrolled defenses.

601009

Former President of NJBK, Shu Hangnong, was sentenced to 5 and a half years in prison for misappropriating 480 million yuan of public funds. This case reveals how financial executives exploit regulatory loopholes for internal profit. In 2009, Shu Hangnong illegally used the bank's reserve funds to prematurely redeem wealth management products, ultimately profiting 15.75 million yuan. The case reflects significant deficiencies in NJBK's internal control system and power balance mechanisms. Despite Shu Hangnong's imprisonment, the bank's internal control issues still persist

How did the former president of NJBK circumvent risk control to misappropriate 480 million public funds and receive a sentence of 5 and a half years?