The State Administration of Foreign Exchange, an arm of the central bank, said in a statement on its website that it has found "some problems" in commercial banks' foreign exchange dealings.

"Problems in the authenticity investigation of transactions involving foreign exchange have enabled speculative funds to enter China's stock and properties market, and thus affect China's marcoeconomic conditions," it said.

"Commercial banks themselves have sometimes not complied with procedures in dealing with foreign exchange transactions... and some data submitted by banks are not up to the regulator's requirements," said the administration.

In 2006, the administration punished 19 domestic and 10 foreign banks for similar violations, it added.

Last week the banking regulator reprimanded and fined eight domestic banks for lending 3.14 billion yuan (410 million dollars) to two state-run enterprises that illegally invested the funds in land and stocks.

CHINA TO REVIVE TROUBLED TRUST SECTOR
Another report adds: China is to revive several trust and investment corporations after hundreds of the government-run companies ran into difficulties during the 1990s Asian financial crisis, state press said Tuesday.

The China Banking Regulatory Commission will issue licenses to five surviving companies that have largely been unable to operate since the crisis a decade ago, the China Daily said.

Hundreds of "international trust and investment corporations" or "ITICs" existed in China prior to the crisis but currently only 55 survive, with most prevented from doing business due to regulations implemented following 1998, the newspaper said.

The new licenses aim to reform the companies into providing "proper trust services offering more diverse financial instruments for corporate and individual clients," it said.

As of September 2006, China's trust firms managed combined assets of 317.8 billion yuan (41 billion dollars), the newspaper reported earlier.

Traditionally the trust firms have served as investment arms of local governments but the sector took a huge blow with the 1999 bankruptcy of Guangdong International Trust and Investment Corp. (GITIC), a reportedly three billion dollar crash that was at the time China's largest-ever bankruptcy.

After the crash of the Guangdong firm, the government realised that such companies were wracked with credit crises stemming from illegal trading and a lack of risk management, the China Daily said in an earlier report.