Standard Chartered is suing Chen Jihong, the owner of a metals trading company at the centre of a loan fraud investigation on the mainland, for US$35.6 million the bank says it is owed under a loan agreement. The bank is also claiming interest and costs under the US$40 million loan facility, according to a July 8 lawsuit filed at Hong Kong's High Court. A spokeswoman for Standard Chartered in Singapore yesterday confirmed the lawsuit against the owner of Qingdao-based Decheng Mining and said the bank could not provide any further information. Two calls to Decheng went unanswered. Banks are examining lending linked to metals at Qingdao port amid concern that risks are more widespread on the mainland, where traders use commodities from iron ore to rubber to get funding. Decheng Mining pledged the same metals stockpile three times over to obtain more than 2.7 billion yuan (HK$3.37 billion) of loans, a person briefed on the matter said earlier this month, citing preliminary findings of an official investigation. Standard Chartered's total commodity-related exposure in the Qingdao area is about US$250 million, chief executive Peter Sands said last month. The loan facility agreement formed with Chen was dated August 26, the company said in the lawsuit. Standard Bank, based in Johannesburg, said it started legal proceedings in China after about US$170 million worth of aluminium was held in bonded warehouses. Citigroup has said it would work closely with the authorities and warehousing firms to resolve any problems for clients. Chen, a Singaporean national, has been detained and the city state's foreign ministry is providing consular assistance to him and his family. Chen is also involved in a separate inquiry in Gansu province, two bankers assisting with the investigation said last month. "We believe this episode is an isolated case on a particular company and not a reflection of a larger systemic problem," said Sandy Mehta, the chief executive of Value Investment Principals. "In every country in the world, be it developed or developing markets, you will find some bad apples." Steps by the mainland government to rein in credit has raised companies' borrowing costs in recent years and triggered a surge in commodities financing deals that Goldman Sachs estimates to be worth as much as US$160 billion. Last week, Citic Resources Holdings was reported to have launched legal action against the warehouse operator at Qingdao port for its missing alumina and copper stocks.