In the latest development in mainland China’s oil-linked product collapse, doubts have been raised about the compliance of banks that sold similar investments to retail clients.
The billion-dollar collapse of the «Crude Oil Treasure» product issued by Bank of China has exposed weaknesses in the country’s financial system and potential non-compliance.
According to an «SCMP» report citing unnamed bank officials from China Construction Bank, Bank of Communications, Shanghai Pudong Development and Industrial and Commercial Bank of China, the aforementioned product allowed retail investors to build positions on international WTI or Brent contracts. Currently, financial institutions in mainland China are not allowed to offer overseas futures trading to individual investors.
Internal Confusion
Whilst the product is believed to have been endorsed by the China Banking and Insurance Regulatory Commission (CBIRC), groups led by law firms such as Beijing Weinuo Law Firm and Beijing DHH (Shanghai) Law Firm which claim to represent over 700 investors disagree, alleging that such access extends beyond the permitted business scope of banks.
«China’s banks still lack risk awareness and risk control capabilities to avert sharp losses when they grapple with black swan events,» said Zhao Changyi, head of China’s training program for financial risk professionals at the State Administration of Foreign Experts Affairs. «There is a bunch of loopholes in China’s financial system that need to be mended by qualified and talented risk management professionals.»
