China’s Biggest Bank Halts Retail Products in Commodities

(Bloomberg) ― Industrial & Commercial Bank of China Ltd., the nation’s largest lender, suspended sales of more products that enable retail investors to speculate on swings in commodities after many were burned by the unprecedented crash in crude oil.

The lender will temporarily halt opening of new positions in products linked to crude oil, natural gas and soybeans for individuals as of 9 a.m. tomorrow, according to a statement issued Monday. ICBC said the suspension is to protect clients’ interests amid recent volatility in commodities. The measures will not affect trading of existing positions, ICBC said in its statement.

An investment product linked to crude oil sold by rival Bank of China Co. led to more than $1 billion of losses for clients after its value plunged below zero, suggesting hidden risk in the system. Official figures show there are about 1.88 billion yuan ($265 million) outstanding in commodity-related investment vehicles, making up less than 0.01% of China’s wealth product market.

The implosion of Bank of China’s crude oil investment product caused an uproar among investors, who took to the internet to protest the lender’s handling of the contract rollover and to demand it shoulder some of the losses. Investors in similar products offered by other banks mostly avoided losses on the same scale, reflecting different product designs.