Bank of China Fined $7.7 Million After Crude Futures Carnage

What’s new: China’s top banking regulator fined Bank of China Ltd. 50.5 million yuan ($7.7 million), after tens of thousands of investors suffered heavy losses on the bank's speculative oil future product due to a catastrophic collapse in crude prices.

In issuing the fine on Saturday (link in Chinese), the China Banking and Insurance Regulatory Commission (CBIRC) cited a grab-bag of compliance issues and other failings related to the crude oil investment product known as “Yuan You Bao.”

They included a failure to pressure-test the investment product, a failure to manage risks, and a failure to adequately disclose information to investors.

In addition, the CBIRC issued individual fines to managers and senior traders in the bank’s global markets department totaling some 900,000 yuan.

The background: In April, about 60,000 Chinese investors who bought the bank’s Yuan You Bao product incurred $1.4 billion in losses when global oil prices turned negative for the first time in history.

Angry investors flooded the internet to protest, accusing the bank of flaws in the product design and demanding that the bank shoulder some of the losses.

Industry experts questioned that whether there were significant design flaws in the product that put people with low risk tolerance into high-risk investments.

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

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

Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Flynn Murphy (flynnmurphy@caixin.com)

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