At the beginning of reforms, the thinking of administrative separation of powers between the central and local  BIS Review 4/2005  1  governments had an adverse impact on the effectiveness of internal controls within commercial banks.
In such a setup, loan organization was decentralized to provincial, regional, city and even county level and a “three-eye practice” being followed with each eye looking separately at the head-office of the bank, the local government and the supervisor, the local branch of the People’s Bank of China (PBC).