Chinese banks scramble to stem fallout from commodity-linked products after oil crash hits investors with billion-dollar losses

ICBC follows peers in suspending new investment in products linked to commodity futures, citing recent market volatility

Caution comes after Bank of China’s oil futures product reportedly saddled retail investors with US$1.4 billion setback

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The Industrial and Commercial Bank of China will halt all open positions in commodity-linked products after oil roiled global markets earlier this month. Photo: Reuters

Published: 8:45am, 28 Apr 2020Updated: 11:08pm, 28 Apr 2020

China’s biggest lenders are rushing to halt new investment in products tied to commodities futures to prevent unmitigated costs from snowballing after the collapse of oil prices burned investors at home and abroad.

Industrial and Commercial Bank of China (ICBC), the country’s largest by assets, has suspended the sale of such financial instruments, it said, after oil’s slump reportedly saddled retail investors at Bank of China and professional traders elsewhere with billions of losses.

ICBC will halt all open positions from 9am on Tuesday in products related to oil, gas, copper and soybean futures, it said in a statement late Monday. Shanghai Pudong Development Bank will also do the same to products tied to copper and soybean futures, the lender said.

The fallout presents a headache for lenders at a time when bad loans are rising after the economy contracted last quarter for the first time since the Cultural Revolution ended in 1976. The losses for small investors at home could be a hot potato for authorities seeking to preserve social order amid the public health crisis.

Recent volatility in the global commodities market “may cause investors to lose all of their cash deposits and investment,” ICBC said.