Qilu Bank, Commonwealth Bank's delinquent associate in China, has had another blow dealt to its reputation after the arrest of an executive on a charge of helping another manager, from its sister fund company, skim clients' profits into their own accounts.The bank executive, Xu Dazhu, was arrested last Thursday by Chinese authorities. Xu is suspected of having collaborated with Zhou Yu of Wanjia Asset Management Co, which is 49 per cent owned by Qilu Securities Co, to facilitate an illegal bond trade, a report by the Chinese language Beijing Business Today said.Zhou was arrested a day earlier, along with another fund manager, Yang Hui, from state-owned CITIC Securities. Both were accused of being involved in a similar profit-skimming practice - the first bond trade irregularity of its kind detected in a government crackdown, the report added, citing anonymous sources.The bond scandal is likely to escalate, with more fund managers likely to be arrested soon, according to multiple media reports, including Caixin in China.The scandal amplifies questions over management controls at Qilu Bank, which had been hoping to shake off an earlier lending fraud.  That fraud, which occurred in late 2010, would cost the bank between RMB 1 billion (A$157.6 million) and RMB 1.5 billion (A$236.4 million) in losses, local media speculated at the time.Local police found that Qilu and several other financial institutions had forged deposit certificates for corrupt businesses so they could secure sweetheart loan deals.  Three months into the lending scandal's investigation, Jinan City Government announced a reshuffle of three of the bank's top management to turn around the regional lender, which is based in Shandong Province.Following the fortunes of Qilu is difficult, given the late disclosure of its accounts.But, under a requirement of the provincial banking regulator, Qilu is expected to disclose its missing financial information for three fiscal years of 2010, 2011 and 2012 by the end of April, according to the bank's board."The bank's to-be-disclosed financials may show that it has recovered its losses and turned healthy," a director in the Shandong office of the China Banking Regulatory Commission previously told Banking Day.Qilu held its annual shareholders' meeting in late March, to finalise its financial reports for the three fiscal years.  During the annual meeting, the bank further decided to give out a cash dividend of RMB 0.06 (A$0.0095) per share for 2012, the bank said in a statement posted a day later on its website.But no dividends will be distributed for the fiscal years of 2010 and 2011, as profits generated in those two years were used to mitigate losses incurred, the statement added. CBA has a 20 per cent stake in Qilu.