China’s banking and insurance regulator said on Friday a series of small and medium-sized bank inspections has uncovered several rule violations and misdemeanours.

The China Banking and Insurance Regulatory Commission (CBIRC) said lenders were found to have contravened rules by lending to undercapitalised real estate projects, to over-indebted local government platforms, and to firms found to have seriously violated environmental laws.

As the economy slows, smaller banks are under increasing pressure after new asset management rules cut off a major source of income and as bad debt from struggling borrowers mount.

The CBIRC also pointed out several corporate governance issues including shareholders who have financed their shareholding via trust loans, the long-term absence of senior personnel, lack of performance appraisals for management and lack of concern about related-party transactions.

Three regional banks have been bailed out by Beijing this year. Large state banks acted as “white-knights” in some cases of sector consolidation, with ICBC announcing a 30 billion yuan investment for a 10.82% stake in the troubled Bank of Jinzhou.

The CBIRC also said risk management and internal control requirements are often not in place. Some lenders have little internal accountability and there were cases where signatures and seals were falsified on guarantees.

Loan funds were also found to have been misappropriated, for example money was lent to a trading company, but then used by an entity other than the borrower.

In some cases, high consultancy fees were charged even though no real services were provided, the CBIRC said.

“All local small and medium-sized banking institutions should pay attention to strengthening internal control, plugging loopholes, and improving mechanisms,” the CBIRC added.