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China's banking regulators on Monday ordered the Bank of China to improve its risk controls and thoroughly investigate a case of suspected fraud that media reports said may involve funds worth more than 1 billion yuan ($120 million).

The China Banking Regulatory Commission said it was cooperating with police in investigating the suspected embezzlement at a sub-branch of the bank in Harbin, capital of northeastern China's Heilongjiang province.


"The Bank of China must thoroughly investigate the incident as soon as possible and severely punish those caught violating laws and regulations without mercy," the banking watchdog said in a statement posted on its Web site.


It said the case had caused serious losses and affected several companies, including a local highway company, Northeast Expressway Co., which has filed a lawsuit against Bank of China's Harbin sub-branch seeking to recover deposits and interest held by the bank.


Northeast Expressway, meanwhile, issued a public notice saying that its chairman, Zhang Xiaoguang, had been detained on suspicion of embezzlement.


The Bank of China is one of China's four big state-run commercial banks. Its Hong Kong subsidiary's shares are traded in Hong Kong and New York and the parent bank is preparing to list its own shares overseas.