The state-owned lender could absorb part of the over $1 billion in losses after sub-zero oil prices hit 60,000 retail investors and led to public outcry.
Bank of China is mulling a partial bailout of the product’s losses, according to a «Bloomberg» report, following reported public outcry online by hundreds of netizens. 60,000 investors were believed to be hit not only by a wipeout of their investment value but are on the hook for additional losses that mirrored oil prices’ plunge into negative territory last month.
According to the report, online protestors expressed discontent about the bank’s handling of contract rollover and demanded that it shoulder some losses. In addition, netizens also demanded that unpaid losses exceeding the original investment value should not count towards the nation’s credit scoring system – a public policy that directly adjusts Chinese citizen’s ease of access to credit and other resources based on behavior deemed favorable ranging from the financial to the social.
The state regulator has also suggested prioritizing social stability, urging Bank of China to tighten risk management of futures-linked products and protect investor interests when resolving disputes, according to a «Caixin» report.
10 Billion Yuan Loss
The bank’s losses could total 4-10 billion yuan ($0.6-1.4 billion), according to an estimate by Jefferies which also accounted for potential legal costs. This would equal 1.6-4 percent of the lender’s pre-tax profits, Jefferies analyst Chen Shujin said.
The unprecedented collapse in oil prices has led fellow state-owned banking giants to tighten the distribution of similar products. ICBC has temporarily halted the opening of new positions linked to oil, natural gas and soy beans. CCB and Bank of Communications have also suspended new positions on retail products linked to West Texas Intermediate crude.
