China issues warning shot to North Korea banks

SEOUL (REUTERS) - Chinese regulators appear to have issued a warning shot to North Korean banks, telling them to stay within the remit of their permitted operations in China or risk penalties after a new round of U.N. sanctions sought to cut Pyongyang's funding.

A report from South Korea's Yonhap news agency on Tuesday cited a Beijing-based source as saying the warning had been given to four North Korean financial institutions, some of whom have been named in United Nations and United States sanctions for aiding Pyongyang in its nuclear and missile programmes.

The report said Chinese authorities had so far turned a blind eye to the short-term lending and remittance operations by the banks, which may have allowed the North to save on fees and have access to preferred exchange rates.

Asked to confirm the report, Chinese Foreign Ministry spokesman Hong Lei said he was unaware of it. If true, the measures would not amount to anything close to the kind of clampdown called for in new U.N. sanctions aimed at curtailing North Korea's nuclear and ballistic missile programmes.