Bank of China Told to Probe Doomed Crude Oil Product

What’s New: China’s banking regulator demanded that Bank of China (BOC) investigate losses generated by an investment product linked to crude oil prices that may have caused losses totaling 10 billion yuan ($1.4 billion), the China Banking and Insurance Regulatory Commission (CBIRC) told Caixin Thursday.

In its first formal response to the collapse last week of BOC’s Yuan You Bao derivative investment product, the regulatory commission said it is paying close attention to the matter. The CBIRC urged the bank to tighten risk management of products linked to futures and resolve disputes with investors through negotiations that protect investors’ interests.

Background: BOC and its 60,000 investors in the Yuan You Bao product are believed to be exposed to nearly 10 billion yuan of losses after oil prices plunged well below zero April 21, leaving investors owing far more than their investments. Buyers of the product, linked to benchmark West Texas Intermediate futures, are furious.

The incident spotlights risks related to China’s booming commodity-linked investment products, which allow retail investors to make risky bets on overseas futures markets while skirting Chinese market regulations intended to protect investors.

Quick Takes are condensed versions of China-related stories for fast news you can use. To read the full story in Chinese, click here.

Related: In Depth: A Bitter, $1.4 Billion Lesson on Commodity Price Speculation

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com)