BOC to ease investor burden on oil trade losses

Business | Bloomberg, Reuters and Avery Chen 6 May 2020

Bank of China (3988) told clients it's willing to shoulder part of the US$1 billion (HK$7.8 billion) loss suffered by thousands of retail investors after a product linked to the price of oil collapsed last month.

The bank, one of the country's "big four" banks, will return 20 percent of the initial investment to clients with less than 10 million yuan (HK$10.98 million) in their accounts. But those big clients who invested over 10 million yuan have to take the all principal loss, mainland media Caixin reported yesterday.

BOC dropped a claim to seek additional payments from clients to cover losses from its settlement of an investment product at a price below zero, mirroring a collapse in an oil futures contract, according to four retail investors who received phone calls from the lender this week.

The proposal came after Chinese regulators pressured the lender to absorb some of the losses amid a public uproar and as other banks halted sales of similar commodity-linked investment products.

The turmoil even reached the highest level of government, with Vice Premier Liu He on Monday issuing a statement calling on banks to strengthen controls over such products and protect investors.

The Beijing-based lender said on April 24 that about 46 percent of the investors had liquidated their positions on April 20, while the remaining chose to either roll over their positions or settle at the expiration, including both long and short positions.

Meanwhile, China Construction Bank (0939) said it had upgraded systems for its commodities investment products on May 2 to prevent the risk of customer losses exceeding trade margins.

"To protect your rights and interests, when international commodity market prices approach zero or when it is reasonable to expect a negative price, the bank will suspend all or part of the commodity account trading, and make adjustments on how to deal with contract expiration time and regulations," the bank said.

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