Chinese Banks to Suspend Opening of Precious Metals Trading Accounts Amid Global Price Volatility

At least seven Chinese banks, including all of the country’s state-owned “Big Four,” said they would suspend the opening of new accounts for precious metals trading, according to public notices posted on the banks’ websites.

The moves come after volatile metal prices in recent months caused some investors to chalk up huge losses on the international markets.

The suspensions were likely linked to disputes between banks and customers left out of pocket due to the price fluctuations, said Zhong Jingji, a department director at Western Futures Co. Ltd., a futures trading firm.

In April, a collapse in global oil prices caused total losses of $1.4 billion among investors who had bet on Bank of China Ltd.’s crude futures product. An executive at a major bank told Caixin that the incident had made regulators more “cautious” about complaints from investors.

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

China Construction Bank Corp. said in a Friday notice that it would temporarily stop open new accounts for trading in precious metals, including gold and silver, and in investment products at the Shanghai Gold Exchange starting Monday, due to “recent dramatic price fluctuations … on the international market, linked to the Covid-19 pandemic and global political and economic factors.” The notice did not say when normal business would be resumed.

The other three major state-owned banks made similar statements. Bank of China said it would suspend individual services linked to the Shanghai Gold Exchange from Saturday, while Industrial and Commercial Bank of China Ltd. and Agricultural Bank of China Ltd. both said they would stop opening precious metals trading accounts and business related to the exchange.

All of the big four told customers to “raise risk awareness and rationally control positions.”

Caixin has learned that an individual investor lost nearly 7 million yuan ($1.06 million) in the 18 trading days to Sept. 24 after purchasing silver contracts on the Shanghai Gold Exchange for 10 million yuan in a deal brokered by a third party backed by Shanghai Pudong Development Bank Co. Ltd.

The investor has reported the loss to regulators including the China Banking and Insurance Regulatory Commission and People’s Bank of China, the country’s central bank.

Contact reporter Lu Yutong (yutonglu@caixin.com) and editor Matthew Walsh (matthewwalsh@caixin.com)

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