SHANGHAI - China Minsheng Banking Corp., a midsized Chinese lender, said Tuesday that police were holding a manager at a branch in northeastern China on suspicion of fraud charges involving 56.7 million yuan (US$7.1 million; euro5.5 million).

The bank is working with police to help minimize the losses resulting from the case and will continue to strengthen its training efforts to improve incentive structures and risk controls, the bank said in a statement on the Shanghai Stock Exchange Web site, dated Tuesday.

Chinese regulators and banks are struggling to clean up a financial system rampant with fraud and poor lending practices. Improved reporting systems and the introduction of modern risk management techniques have yielded some improvements, although problems persist.

In the first half of the year, 480 cases were discovered in China's banks involving fraud or other crimes, 240 less cases than in the second half of 2005, the China Banking Regulatory Commission said last week.

A Shandong province-based company and five individuals sued Minsheng Bank in a series of cases starting in January this year to return funds allegedly improperly taken by Sun Peng, the branch manager, Minsheng said.

As a result, police were conducting a criminal investigation, said statement, which was published in response to a report by the state-run newspaper Legal Daily.