The city's economic planning body invited 13 commercial banks to bid for the job in mid-November, and ICBC, China's biggest bank, won after a final presentation at the end of last month, the lender said yesterday.

In the past, the city's labor and social security bureau controlled the welfare money, and there was little public awareness of where it went.

The bureau used to have only one bank savings account that was used for both capital inflow and outflow, making it hard to supervise investment activities.

That legacy may be at least partly to blame for Shanghai's snowballing pension fund scandal, in which billions of yuan in fund proceeds have been misused and a raft of public officials, including former city Party Secretary Chen Liangyu, have lost their jobs.

Zhu Junyi, former head of Shanghai's labor and social security agency, and Zhang Rongkun, a business tycoon who reportedly borrowed 3.2 billion yuan (US$408 million) from the welfare fund, are under government investigation for unspecified malfeasance.

Shanghai issued new guidelines on November 1 to govern the management of its 10-billion-yuan welfare fund, ordering the social security bureau to set up separate income and expenditure accounts.

Under the current arrangement, a special finance account must also be established at a so-called settlement bank to serve as a bridge, and to provide authorities better oversight of capital inflow and outflow.

In an apparent attempt to prevent further misuse of funds, capital management was transferred to the city's finance bureau. The municipal government also has to review the social security budget.

In addition, pension funds are restricted to investments in treasury bonds and bank deposits to ensure safety.

Previously, part of the money was invested in projects ranging from road construction to real estate, many of which carried significant risks.