Chinese authorities have recently discovered a banking fraud that involved multi-billion worth of money that it could require government intervention and could further undermine the country's banking system.

The latest banking fraud, which is one of China's biggest in decades involved the sum of US$4.9 billion with the Bank of Liuzhou as victim, according to the state-backed China Business Journal in a report on Thursday.

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The discovery was the latest in the series of China's fraudulent loans, which further undermine the country's US$29 trillion banking system, according to the report.

Bank of Liuzhou reportedly discovered the fraudulent Rmb32.8 billion (US$4.9 billion) loans late last year when the new chairman of the bank assumed office. The fraudulent loan represents at least 40 percent of the bank's total asset at the end of 2014, the China Business Journal said.

The fraud involved the massive pile of debt accrued by one borrower during the tenure of the previous bank head. The borrower, a businessman, allegedly connived with relatives to forge collateral and proof of business operations to borrow US$4.9 billion.

The report further added that the businessman, who was not named, allegedly ordered the murder of the new bank head following the discovery of the multi-billion-dollar loan fraud.

A Financial Times report quoted local Chinese media as saying that the bank will not be able to recover fraudulent loans worth more than eight times its 2014 profits and that government intervention could be needed to ensure that the bank remains operating.

The Bank of Liuzhou has not issued a statement regarding the report loans fraud as of this reporting.

The report said the Bank of Liuzhou case is one of the country's biggest banking frauds in decades and followed China Citic Bank, the country's ninth-largest bank by assets, which late last month said it was investigating a US$147 million fraud.

TagsChina Banking, Banking Fraud, Bank of Liuzhuo