Retail Banks

Bank of China Retail Investors face over USD1 billion loss

Some Bank of China retail investors have reportedly lost over USD1.27 billion in deposits following the collapse of the Bank’s crude oil “bao” offering.

According to a Reuters report, over 60,000 retail investors may have lost deposits with the Bank, potentially totalling to up to CNY4.2 billion, or over USD1.27 billion following the market turmoil induced by the coronavirus.

The Bank of China’s crude oil “bao” is linked to domestic and foreign crude oil futures contracts, including the Brent Crude and West Texas Intermediate (WTI); the price of WTI futures infamously fell below USD0 in April 2020. “Bao,” according to a Bank of China spokesperson, is sold to the Bank’s customers on an individual basis.

Following the sinking of the price of oil below zero, Bank of China settled trades as the price ended at negative USD37.63 per barrel.

The Reuters article shares that the Bank of China held up to 25,000 long positions in the product, each position being made up of 1,000 barrels, thus translating to approximately a loss of over USD821 million.

The Bank of China has stated that it is “deeply disturbed” by the losses incurred, pinning the blame on the global market volatility in the oil market, resultant of the COVID-19 pandemic.