BEIJING, June 14 -- China's bank regulator said yesterday it has ordered a branch of Pudong Development Bank to halt all property lending, after the discovery of US$16 million in fraudulent loans.

The Pudong Bank branch in Lujiazui, Shanghai's financial center, has also been ordered to pay a fine of 500,000 yuan (US$62,500), a spokesman with the Shanghai branch of the China Banking Regulatory Commission (CBRC) said.

Pudong Bank, Citigroup's partner in China, said last week it was investigating possible fraudulent loans, and that it first discovered the case during an internal investigation last October.

"We requested all banks and financial organizations in Shanghai to further strengthen their risk management and internal regulation," said the spokesman for the Shanghai branch of the CBRC, who would only give his surname as Wang.

Mortgages have been one of the riskiest sorts of bank loans in China and the focus of many illicit deals, as investors buy to speculate in a booming market.

Last month China's top banking regulator, Liu Mingkang, demanded that the expansion of real estate credit be brought under control through raising down payments of mortgages for homes and investment properties.

Pudong Bank's shares were down 1.3 percent yesterday morning. They were down nearly 9 percent since last Wednesday.

(Source: Shenzhen Daily/Agencies)