Three Chinese Banks Deny Being Probed by U.S. in Relation to North Korea Sanctions

BEIJING--Three Chinese banks denied that they were involved in any investigation related to possible violations of North Korea sanctions after a report about the probe sent their stocks down Tuesday.

The Washington Post reported Monday that three Chinese lenders were found by a U.S. judge to be in contempt for refusing to comply with subpoenas in an investigation into North Korea sanction violations, a decision which could cut off their access to the U.S. financial system.

The three banks were not identified by the judge, but the report said details in the court ruling align with a 2017 civil forfeiture action against three Chinese banks--Bank of Communications, China Merchants Bank and Shanghai Pudong Development Bank.

Shares of China Merchants Bank traded in Hong Kong tumbled nearly 10% Tuesday before recovering some of their losses in the afternoon, after it denied it was being investigated. The Shenzhen-based lender said it a statement that it complies with related United Nations resolutions and Chinese laws.

Bank of Communications, a state-owned lender, said in a statement that a U.S. court had asked Chinese banks to hand over information about their clients outside of the U.S. and said the request is a matter of legal assistance and should be carried out under the auspices of a legal assistance pact signed between the U.S. and China. After it released a statement, stocks of the state bank recovered and ended 3% lower on Shanghai Stock Exchange.

Shanghai Pudong Development Bank, when asked to comment on the report, said it couldn't provide clients' information to overseas authorities without authorization. The bank's shares dropped 3.1% in Tuesday's trading, recovering from a 4% loss earlier in the day.

Write to Grace Zhu at grace.zhu@wsj.com

(END) Dow Jones Newswires

June 25, 2019 03:46 ET (07:46 GMT)

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