The Shanghai branch of Industrial and Commercial Bank of China won the bid to become the settlement agency for Shanghai's social security fund, which marked the implementation of the city's new financial rules for the management of its funds.

The two line management system for revenue and expenditures will kick off operation in the near future. Shanghai issued a regulation on November 1 to prevent its pension funds from being misused. It stipulated that the money in the revenue account must be separated from the money in the expenditure account to improve the supervisory of the pension funds.

Thirteen state-owned or controlled banks entered the bid in mid November.

The regulation issued last month is applicable to the management and operation of four other insurance funds covering unemployment, medical treatment, pregnancy leave and work injuries. The management of insurance funds for people living in the city's smaller townships and its migrant workers will also come under the new guidelines.

It regulates that fund operators should publish the income and expenses as well as the balance of the funds publicly.

The city's financial operator should also review the annual budget of the funds handed in by the social security department. Upon approval by the financial authority and ratified by the municipal government, the budget will be carried out by the social security department and put on record at the country's financial ministry and the ministry of labor and social security.

The funds operator shall strictly abide by the budget and report the budgets performance regularly.

Financial and social security authorities shall report to the financial ministry and the ministry of labor and social security, in accordance with the rule. They are also ordered to enhance the monitoring of the funds and rectify problems immediately.

To further enhance the monitoring and supervision of the funds, the regulation stipulates that the establishment of three independent accounts – a checking account, savings account and a specific financial account under state-owned or state controlled banks.

Earlier reports said the city's social security authority had been in sole control of the funds.

The specific account will act as a bridge for the two other accounts and will hold the interest generated and subsidies offered by the government.

Since late August, state investigators have been looking into claims that billions of yuan have been misappropriated from the city's pension funds.

The city's corporate annuities have reportedly been misused to provide improper loans without sufficient collateral and for risky long-term investments in real estate and other ventures.

The investigation has so far brought down several senior city government officials and corporate executives, and has led to the dismissal of Shanghai's Party secretary and the head of the pension fund.