Firms such as China Construction Bank have been told to tighten procedures

A former Bank of China employee was arrested on Sunday in connection with the alleged embezzlement of $6m, one in a series of recent incidents.

Zhai Changping, who worked as a bank clerk in the city of Dalian, was seized in the north-east of the country.

China's banking sector has been beset by cases of fraud in recent times.

Regulators have told firms to tighten their lending procedures.

Better supervision

The China Banking Regulatory Commission (CBRC) published a circular on Sunday detailing 13 areas in which companies should improve management of financial risks.

These included increased supervision of bank branches, more accountable management and more efficient computer systems to detect financial wrongdoing.

In some banks there are inadequate rules and no proper supervision of the implementation of those rules China Banking Regulatory Commission

Banking practices have been under the spotlight since two of China's largest banks - Bank of China and China Construction Bank - are seeking to raise capital on overseas stock markets later this year.

The chairman of China Construction Bank, Zhang Enzhao, resigned for ''personal reasons" last month amid reports of an investigation into alleged corruption at the bank.

Police have issued arrest warrants for a handful of bank employees in connection with fraud.

Handling risk

The Xinhua news agency reported police officials as saying that Zhai had been accused of carrying out the fraud for six years.

The CBRC has put banks on notice that they must crack down on fraud, carrying out spot checks to classify the degree of risk of loans.

"The weak ability to handle risk in bank operations has become increasingly prominent in the development of the banking sector," the Commission said in the circular.

"For example, in some banks there are inadequate rules, no proper supervision of the implementation of those rules, lenient punishment for violations, weak management and poor internal controls, all of which lead to major problems."