China’s Banking Regulator Bans Lenders from Selling Commodity-Related Products to Retail Investors

Amid the volatile jump in commodity prices, China’s banking regulator has ordered lenders to halt the sale of commodity futures-related investment securities to retail investors, in an effort to stem surging losses.

According to Reuters, which cited people familiar with the matter, the China Banking and Insurance Regulatory Commission (CBIRC) has asked the lenders to cease selling commodity-futures related products, as well as unwind any current holdings of such products which may otherwise be sold to individual investors.

The latest decision comes as surging commodity prices in both offshore and onshore markets have sparked concern among regulators regarding the heightened risks of speculative betting. In fact, the prices have been so volatile, the country’s state planner as well as a number of Chinese exchanges have decided to enact price control measures.

The CBIRC’s proactive move serves as a cautionary approach to avoid losses similar to the ones the Bank of China sustained last year on crude oil-related investment products, the individuals explained to Reuters. The BoC’s losses in 2020 caused several thousand small accounts held by retail investors including students and retirees to be wiped out.

Regulators such as the CBIRC are concerned that regular investors may once again suffer significant losses due to sharp price swings in commodities. The strong post-pandemic economic recovery has caused demand for surge upwards, sparking an interest in speculative and liquidity trading.

The banking regulator has called on lenders, as well as the Industrial and Commerce bank of China (ICBC) to issue monthly reports to regulators on its ‘cleaning progress” of the commodity-related products. However, the CBIRC did not provide a specific deadline for banks to exit their positions.

Information for this briefing was found via Reuters. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.

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