SHANGHAI - The China Banking Regulatory Commission (CBRC) sent an investigation squad to the Nanjing branch of China Bohai Bank Co Ltd to check on loans in excess of 100 million yuan ($15.7 million) the bank made to a local company, the China Business News (CBN) reported, citing the bank.

The CBN report quoted Zhang Jinyu, a director of the administrative office at the Nanjing branch as saying that the loans have "uncontrolled risks" and that he has been "overwhelmed" preparing materials for checks by different government agencies.

Neither the bank's Tianjin headquarters nor its branch in Nanjing answered repeated phone calls on Friday.

The loans in question were made to Nanjing Yuyang Group, a local maker of scaffolding. Its chairman, Yang Jun, went missing at the end of August after borrowing more than 500 million yuan from 10 banks in Nanjing, the Securities Times newspaper reported.

The Securities Times also alleged that Yuyang is suspected of tax evasion and would have to pay the supposed missed taxes if it files for bankruptcy, meaning there would be little hope of Bohai getting its capital back.

The move underscores the CBRC's latest efforts to ensure the solvency of China's banking system, which is under pressure after the recent decline in real estate prices.

In recent years, the CBRC has repeatedly urged the country's commercial banks to control lending risks and ensure that they remain solvent. Shang Fulin, the newly appointed CBRC chairman, said earlier this month that banks should "strictly guard their risk bottom line and improve their risk-management abilities".

But some banks, especially smaller commercial banks such as Bohai, refused to lower their risk appetite in the face of strong competition.

Since 2008, a strong trend has emerged for the country's around 150 city commercial banks to extend business beyond their home regions. The trend has fueled competition among the commercial banks, forcing some to provide riskier loans to maintain profitability.

The city commercial banks have around 10,000 outlets nationwide. Bohai, for example, is based in Tianjin but has 51 branches and outlets in 13 cities.

"Fierce competition is the reason why so many banks were willing to lend so much money to a privately owned scaffold maker," said a Shanghai-based banking analyst who declined to be named.

The security of its banking system is essential for the world's second-biggest economy, where direct financing, mostly bank loans, accounts for the bulk of the country's total social financing, which hit 7.7 trillion yuan in the first half of this year.

Too many insolvent banks could result in turmoil for the financial system.