Bank of China settles over half of cases in oil product losses

[Tom Kirkman + 8,860]

Negative WTI prices burned some Bank of China oil futures investors. 

Bank of China offers to absorb all losses by investors, from WTI going into negative prices.

Nothing to see here, move along.

 

BoC settles over half of cases in oil product losses: sources

BEIJING (Reuters) - Bank of China (BoC) has settled with more than half of customers hurt by losses in a crude oil-linked product after a historic oil price slide into negative territory, two sources with direct knowledge of the matter said.

China’s fourth-largest bank last week offered to shoulder all losses from the fall into negative territory and compensate up to 20% of investors’ original investment, Reuters reported. The deal will lead to a total 6-7 billion yuan ($1.84 billion) hit for BoC if all loss-recording investors settle.

The offer came after the bank said in late April it had settled trades for its crude oil futures trading product, also known as crude oil “bao”, at minus $37.63 per barrel, leaving mainly retail investors deep in the red.

Bank of China declined to comment.

“A 50% or higher settlement rate so far is relatively quick for settling financial disputes,” said Wang Hongying, a director with the Institution of Financial Derivatives of China, a Hong Kong-based think tank.

“(BoC) had to come up with a reasonable deal to soften the pressure of massive legal disputes, and turn around the financial stability concerns it brings,” Wang added.

Some individual investors told Reuters they believed the bank should still offer an improved compensation deal.

The crude oil “bao” is a structured product made up of a bundle of futures contracts, and linked to global commodity prices.  When West Texas intermediate (WTI) oil futures fell into negative territory for the first time ever in April, BoC’s “bao” was one of many products to rack up major losses.  ...

 

[BLA + 1,666]

4 hours ago, Tom Kirkman said:

Negative WTI prices burned some Bank of China oil futures investors. 

Bank of China offers to absorb all losses by investors, from WTI going into negative prices.

Nothing to see here, move along.

 

BoC settles over half of cases in oil product losses: sources

BEIJING (Reuters) - Bank of China (BoC) has settled with more than half of customers hurt by losses in a crude oil-linked product after a historic oil price slide into negative territory, two sources with direct knowledge of the matter said.

China’s fourth-largest bank last week offered to shoulder all losses from the fall into negative territory and compensate up to 20% of investors’ original investment, Reuters reported. The deal will lead to a total 6-7 billion yuan ($1.84 billion) hit for BoC if all loss-recording investors settle.

The offer came after the bank said in late April it had settled trades for its crude oil futures trading product, also known as crude oil “bao”, at minus $37.63 per barrel, leaving mainly retail investors deep in the red.

Bank of China declined to comment.

“A 50% or higher settlement rate so far is relatively quick for settling financial disputes,” said Wang Hongying, a director with the Institution of Financial Derivatives of China, a Hong Kong-based think tank.

“(BoC) had to come up with a reasonable deal to soften the pressure of massive legal disputes, and turn around the financial stability concerns it brings,” Wang added.

Some individual investors told Reuters they believed the bank should still offer an improved compensation deal.

The crude oil “bao” is a structured product made up of a bundle of futures contracts, and linked to global commodity prices.  When West Texas intermediate (WTI) oil futures fell into negative territory for the first time ever in April, BoC’s “bao” was one of many products to rack up major losses.  ...

 

Only 20% 

[Dan Warnick + 6,100]

2 hours ago, BLA said:

Only 20% 

I've been there.  Say you had $10k in.  I can get started again with $2k on a few contracts where only the money I put in can be lost (no additional margin).  It would be like actually having started with $12k, so yeah, I'd take the $2k with thanks.  It doesn't make you any smarter and you'll probably lose the $2k too, but what the hell.  All in!