Bank of China may absorb part of US$1 billion in client losses on product linked to oil price collapse

Lender is talking to regulators about not seeking recourse on losses in excess of investors’ margins, people familiar said

Hundreds of retail clients have taken to the internet to protest the bank’s handling of the situation

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Industrial and Commercial Bank of China, China Construction Bank and other lenders have halted new investment in commodity-linked products after spectacular fall in oil prices this month. Photo: Bloomberg

Published: 10:15am, 30 Apr 2020Updated: 10:15am, 30 Apr 2020

Bank of China, facing a public outcry and regulatory scrutiny over the collapse of an investment product linked to oil futures, may shoulder part of US$1 billion in losses suffered by its retail clients, according to people familiar with the matter.

The nation’s fourth-largest bank by market value is talking to regulators about not seeking recourse on losses in excess of investors’ margins, said the people, who asked not to be identified discussing a private matter. Regulators are leaning toward having the bank take some losses, they said. The plan is not final and subject to change.

Thousand of retail investors across China are facing combined losses topping 7 billion yuan (US$1 billion) after the bank’s “Crude Oil Treasure” product was settled at prices far below zero, mirroring the collapse in West Texas Intermediate crude on April 20 to minus US$37.63 a barrel.

Hundreds have taken to the internet to protest the lender’s handling of the contract rollover and to demand it assume some of the shortfall.

Investors who do not make good on losses that exceed their total investment should not have that reflected in the nation’s credit scoring system, the people said. The central bank and the banking regulator did not immediately reply to requests seeking comments.

Bank of China said in a statement late Wednesday that it is “actively” working on a solution to address clients’ “reasonable” complaints and demands, and will try its best to protect their rights and take social responsibility.

Meanwhile, the lender has sent CME Group an official request, urging the exchange to investigate reasons behind “abnormal” price volatility in crude futures seen on April 21, according to the statement.